Market share is defined as "the percentage of a market (in terms of either units or revenue) accounted for by a specific entity". Global market share is a key indicator for a company’s competitiveness as it is largely independent of macroeconomic fluctuations and directly comparable across companies.
The distribution of market share also serves to characterize a market. A market in which one entity holds 100 percent market share is called a monopoly. In a monopoly, one company is the only supplier of a certain good or service and thus has the power to set prices at will. Monopolies typically maximise their profit by producing less than the economically optimal amount and selling the product at higher prices. The market outcome delivered by a monopoly is generally not welfare-optimizing and thus most jurisdictions restrict monopolies or the abuse of monopolistic power by law. There are exceptions however: patents, for example, are a common way to legalize monopolies for a limited amount of time in order to provide an incentive for innovation. An example of a (nearly) monopolistic market is the market for personal computer operating systems. In January 2012, the global market share of Microsoft’s Windows operating systems
was almost 90 percent and Microsoft has repeatedly been accused of abusing its power to further strengthen its position.
An oligopoly describes a market dominated by few sellers. In economic theory, oligopolists are aware of the behaviour of their competitors and plan their actions with respect to their anticipated reaction. An example of an oligopolistic market is the smartphone market, in which the global market share
of the five biggest players amounts to 75 percent. The economically “ideal” market would be a market of perfect competition, in which there are many suppliers of an identical product. In this setting, all suppliers are “price takers”, i.e. they are too small to have the power to influence prices. Perfectly competitive markets are theoretically efficient in the long run, they do however hardly ever occur in reality.
A market type that is more likely to occur in reality is monopolistic competition. Monopolistic competition shares some assumptions with perfect competition but is less strict in others. In monopolistic competition, many suppliers offer similar, yet not identical goods. Product differentiation enables firms to generate market power, i.e. in contrast to perfect competition they can change prices without losing all their customers. Good examples of monopolistic competition would be toothpaste or toilet paper: these products have nearly perfect substitutes on the market and yet firms are able to retain customers by building brand loyalty
or differentiating their product in some other way.
Market share can be calculated on different levels: regional market share; national market share, e.g. market share of record companies in the United States
; and global market share, e.g. global market share of smartphone operating systems
. In the past, many companies operated on a national level only and thus, national market share was the most important metric. Today, as markets are increasingly open and companies operate across national and continental borders, global market share is becoming more and more important.
In many cases however, it is very complicated to measure global market share in an accurate way: while sales data is often well-monitored and documented for individual markets, the problem is to compile the data on a global scale. Furthermore, while some companies publish sales data on a regular basis, others are very protective of their data. Apple, for example, publishes detailed sales data for all of its products, while some of its competitors, such as Amazon, refrain from doing so. As a consequence the global market share of the iPad and other tablets
can only be estimated by market research firms. It is a little easier to measure global market share based on actual use of a product. For example, the global market share of web browsers
can be measured sufficiently accurately by firms who track web traffic.