Hi!
This is a nice example why you have to always first align on the definition of your focus metric. You can not just assume something!
"Market Share" is not universally defined. The most common definition is probably "Company Revenue divided by Market Revenue". But the definition differs by industry. Sometimes it is not about revenue, but about number of customers. Or about volume. Or something completely crazy, like balance sheet size (this is the case in Banking!). So before you start with anything, you have to define your focus metric.
And even if it is Revenue - decline in market share does NOT mean that revenue is decreasing! It means that the numerator (Revenue) becomes smaller RELATIVE to the denominator (Market Size). So you can also lose market share with growing revenue - if the market grows faster.
So Step 1 is a numerical analysis: codify the definition, then break down the definition into its numerical drivers, isolate where the problem comes from. This gives you the answer to WHAT the problem is, but not yet WHY the problem exists.
This is analyzed in a second step, which is a qualitative analysis, where you ask qualitative questions exclusively focused on the isolated problem driver to understand, what its underlying reasons are.
Hope this helps!
Cheers, Sidi
Hi!
This is a nice example why you have to always first align on the definition of your focus metric. You can not just assume something!
"Market Share" is not universally defined. The most common definition is probably "Company Revenue divided by Market Revenue". But the definition differs by industry. Sometimes it is not about revenue, but about number of customers. Or about volume. Or something completely crazy, like balance sheet size (this is the case in Banking!). So before you start with anything, you have to define your focus metric.
And even if it is Revenue - decline in market share does NOT mean that revenue is decreasing! It means that the numerator (Revenue) becomes smaller RELATIVE to the denominator (Market Size). So you can also lose market share with growing revenue - if the market grows faster.
So Step 1 is a numerical analysis: codify the definition, then break down the definition into its numerical drivers, isolate where the problem comes from. This gives you the answer to WHAT the problem is, but not yet WHY the problem exists.
This is analyzed in a second step, which is a qualitative analysis, where you ask qualitative questions exclusively focused on the isolated problem driver to understand, what its underlying reasons are.
Hope this helps!
Cheers, Sidi
I would first want to see if our company have declined their sales or just not grown with the market, if there is a decline in sales as well they have a larger problems. Otherwise I would maybe look at what the competitors are doing that are growing, our clients ability to replicate this, and what excactly the customers in the growing market is looking for. — Carl on Jul 01, 2020