Firms are always concerned with the size of the potential market for their products or services and the proportion of that market they actually reach—often referred to as a company's market share. Market share is the percentage of the total market (or industry) sales made by one firm. As a formula, Market Share = Firm's Sales ÷ Total Market Sales. Share can be reflected as either percentage of sales dollars, percentage of units sold or percentage of customers. Percentage of sales dollars is the most common reference.

Market share is one of the most commonly quoted measures of success in any industry. To correctly determine market share, one must clearly define the market. Having a small share of a large market can be as profitable as a large share of a small market. A producer of leather horse saddles must determine if his market is made up...