Calculating the Relative Market Share Position in BCG Matrix
Jaap de Jonge, Editor, Netherlands
With the BCG Matrix, a multidivisional organization is able to manage its portfolio of businesses by examining the relative market share position and the industry growth rate of each SBU (~division) relative to all other divisions in the organization.
In my opinion, rather than what @Satish Bankal
said, "Relative Market Share" position is always defined as: the ratio of an SBU own market share in a particular industry to the market share held by the largest rival firm in that industry.
In other words, in a formula:
Relative Market Share
= Own Market Share / Largest Competitor Market Share
- You can use both percentages or absolute revenues in the above formula, it will give the same results.
- As a result of this formula, you will always find relative market shares between 1 and 0, because:
- If an SBU is NOT the market leader in a market, you will find a relative market share between zero and 1.
- If an SBU is the market leader, its relative market share is always exactly 1.
Example Relative Market Shares in the ketchup market/industry:
Suppose our ketchup market looks like this:
|COMPANY||MARKET SHARE IN 2015|
The relative market share of Company C in the ketchup market is: 0.14 / 0.22 = 0.64.
The relative market share of Company A in the ketchup market is: 0.22 / 0.22 = 1.