Calculation of the share of a business entity in the product market.
Market share is a traditional tool with which you can evaluate the performance of any enterprise, as well as predict future development prospects. This indicator shows what place the company occupies in the corresponding market segment relative to its competitors.
It is worth noting that a quantitative display of market share can be obtained by calculating the percentage of sales volume to the total sales volumes of products that belong to the same group.
Market share reflects how effective the company's marketing activities are. It should be noted that at the moment there is no universal method, unanimously adopted in the world economy, allowing for a perfect measurement of this indicator. A company's share can be calculated not only in the market, but also for a separate service segment, that is, that part of the market volume for which many companies are actively competing.
If the total sales volume in the relevant market segment cannot be calculated, then the share can be determined relative to such parameters as:
- Sales of nearby competing companies.
- Market segment leader or leading competitor.
What methods are there to calculate market share?
There are several effective ways, with the help of which you can correctly determine the share, namely:
In kind
The indicator is the number of product units that are sold by a certain enterprise as a percentage of total market sales, which are expressed in identical units. IN in this case you should use the following formula:
Market share=Unit sales as a percentage/Volume of the same sales made in the market.
In value terms
The sales volume indicator differs from the first method by reflecting the cost at which products are sold. In this case, the calculation formula will look like this:
Market share = Sales volume in currency / Overall sales volumes in the market segment.
Through brand consumption intensity
This method is also known as the R&S technique. To use the Parfitt and Collins methodology, it is necessary to use information from panel surveys, which are conducted on the basis of a regular sample of actual buyers. It is worth noting that calculations are carried out as percentages, and the formula looks like this:
Brand market share= Brand penetration * Repeat purchase trademark* Brand consumption intensity.
Brand penetration is the percentage of consumers who have purchased a brand at least once out of all consumers who have purchased the company's products.
Repeat purchase reflects how committed consumers are to a brand. This indicator is calculated as a percentage of brand purchases that consumers have purchased more than once over a specified period of time.
Brand consumption intensity means the ratio of the average rates of purchase of the company's products by those consumers who make repeated purchases to the average rates of consumption of all groups of products presented in a particular category.
What are the purposes of conducting a market share analysis?
Share analysis is carried out to determine two purposes, in particular:
- Effectiveness of struggle in a competitive environment.
- Advantages in a competitive environment.
It is worth noting that small market segmentation is most often used to determine the first goal. In this case, it is necessary to analyze each segment, including territory, group, product category. In turn, to determine competitive advantages segments that are more aggregated should be used. This will allow the best way understand the competitive capabilities of the company as a whole in the market.
How can you collect information about a specific market?
To correctly calculate market share, it is necessary to collect relevant data. It is worth considering that collecting detailed information on a market segment is a rather complex task. There are a number of sources from which data can be obtained, in particular:
- Government statisticians.
- Manufacturers' associations.
- Retail trade networks.
- Independent research and analytical agencies.
It is recommended not to stop at one of them, but rather to collect available information from several sources. Then you should compare it, since only in this way can you correctly assess the state of the market.
In cases established by law, business entities must obtain the preliminary consent of the antimonopoly authority for a transaction on economic concentration. When a business entity submits an application to the Ministry of Antimonopoly Regulation and Trade of the Republic of Belarus (hereinafter referred to as MART) for the issuance of a document of consent to a transaction on economic concentration, the completed form “Information on the main types of goods, volumes of their production and supply” in accordance with Appendix 2 must be attached to the application. to the Instructions on the procedure for considering applications, documents and (or) information on giving consent to the reorganization of business entities, the creation of commercial organizations and associations of business entities, approved. by resolution of the Ministry of Economy dated November 30, 2015 N 64, with the calculation of the share per commodity market. The size of a business entity’s share in the relevant product market will have a significant impact when MART makes a decision to issue consent to a transaction or to refuse to issue such consent. Therefore, it is very important to calculate the share correctly and, if possible, with minimal errors.
The issue of calculating the share of an economic entity in the product market for the purpose of applying to the antimonopoly authority for approval of a transaction on economic concentration is regulated by the following regulations:
— Instructions on the procedure for considering applications, documents and (or) information on giving consent to the reorganization of business entities, the creation of commercial organizations and associations of business entities, approved. by MART Decree No. 1 of 01/03/2018 (hereinafter referred to as Instruction No. 1);
— Instructions on the procedure for considering applications, documents and (or) information on giving consent to carry out transactions with shares (shares in authorized funds) of business entities, approved. by MART Decree dated January 3, 2018 No. 2 (hereinafter referred to as Instruction No. 2).
In addition, in practice, for calculations, you can use the Methodological recommendations for analyzing and assessing the state of competition in commodity markets of the Republic of Belarus, approved. Order of the Minister of MARCH dated 02/13/2017 N 19 (hereinafter referred to as the Methodological Recommendations), and the Instruction on the procedure for determining the dominant position of business entities, approved. Resolution of the Ministry of Economy dated March 20, 2015 N 24.
In accordance with clause 28 Methodological recommendations the share of an economic entity in the product market is determined in relation to the established time interval, the product and geographical boundaries of the product market in question, as well as the composition of participants in the product market.
Thus, to calculate the share of a business entity, it is first necessary to determine the following main qualitative and quantitative indicators.
1. Subject composition
An economic concentration transaction usually involves several business entities. First of all, it is necessary to determine which of the participants in the transaction should calculate their share in the product market.
When applying to MART with an application to obtain consent to create a union, association, state association, creation of a holding, reorganization of legal entities in the form of merger and accession, the share in the product market is calculated by each founder of the association, each participant in the holding and each legal entity involved in the reorganization<*> .
When applying to MART for consent to the reorganization of an economic entity occupying a dominant position in commodity markets, in the form of transformation into a joint stock company, the share in the product market is calculated only by the economic entity occupying a dominant position.<*> .
When applying to MART with an application to obtain consent to carry out a transaction with shares, shares in the authorized capital of business entities, the share in the commodity market is calculated by the buyer and the organization whose shares (share in the authorized capital) are acquired<*> .
2. Determination of product boundaries of the product market
Before determining the organization’s share in the product market, it is necessary to determine the “relevant market” in which to count such a share, i.e. the market in which a business entity carries out its activities and in which relations of competition and monopoly develop for a specific business entity.
It is enough to simply define the “relevant market” to calculate its share in it for an organization that carries out only one type of activity. For example, for an organization performing watch repair work, the share must be calculated in the market for watch repair work (services).
Organizations that carry out several types of activities, in practice, are faced with the question of whether it is necessary to calculate the share in all markets in which the organization is present, or whether it is sufficient to calculate the share only in relation to the main type of activity. The legislation does not directly answer this question. In practice, the calculation of the share of an economic entity is carried out on the product market, which is determined by the main type of activity of the organization.
At the same time, we believe that in certain cases it is necessary to calculate the organization’s share in product markets, determined not by the main type of activity.
Example
LLC "A" intended to acquire shares in the authorized capital of LLC "B". When submitting documents to MART, it was necessary to calculate the product market share of LLC “A” and LLC “B”.
The main activity of LLC "A" was wholesale trade in computers, peripherals computer equipment And software(code 46510 of the national classifier of the Republic of Belarus OKRB 005-2011 “Types of economic activity” (hereinafter referred to as OKED code)). Accordingly, the share had to be calculated in the commodity market for trading computers, peripheral computer equipment and software.
The main activity of LLC B was the wholesale trade of other machinery and equipment not included in other groups (OKED code 46690). Consequently, the share had to be calculated on the commodity market for trade in other machinery and equipment not included in other groups. At the same time, LLC “B” also carried out the activity of wholesale trade in computers, peripheral computer equipment and software (OKED code 46510), like LLC “A”, but this activity was not the main one for LLC “B” and brought only 5 % of the company's total profit.
Since the specified type of activity according to OKED code 46510 was carried out by both organizations, the acquisition of LLC “A” shares in the authorized capital of LLC “B” could increase the influence of LLC “A” in the market for the wholesale trade of computers, peripheral computer equipment and software, which could accordingly affect to competition. In this case, it was necessary to calculate the share of LLC “B” in the commodity market for the wholesale trade of computers, peripheral computer equipment and software (OKED code 46510), despite the fact that this type of activity was not the main one for the organization.
3. Determination of the geographical boundaries of the product market in which the business entity operates
A business entity can carry out its activities throughout the republic or only within one or several regions, the city of Minsk. Thus, the share of a business entity can be determined in relation to the republican commodity market and (or) in relation to the regional market.
4. Determining the time interval
Information on the main types of goods (work, services), volumes of production and delivery is presented in forms in accordance with Instructions No. 1 and No. 2 for the calendar year preceding the year of filing the application, and the reporting period from the beginning of the year of filing the application<*> .
Thus, the time interval for which a business entity needs to calculate its share in the product market is determined at the legislative level - the share of a business entity must be calculated:
- based on the results of the year preceding the year of filing the application;
- based on the results of the last reporting period of the year of application.
In practice, the reporting period is understood as a quarter.
Example based on practical application
LLC "A" intends to submit an application to MART in August 2018. In accordance with the requirements of the law, LLC "A" needs to calculate its share in the product market based on the results of 2017, as well as based on the results of the second quarter of 2018. If based on the results of the second quarter it is impossible to calculate the share due to the lack of information on the market volume in the statistical authorities, it is necessary to calculate the share for the first quarter, attaching to the application to MARCH a response from the statistical authorities about the lack of information on the market volume for the second quarter.
5. Product market volume
Before determining the organization's share in the market, it is necessary to determine its total volume, from which this share can be calculated.
The main indicator for calculating the volume of the commodity market and the shares of economic entities in the market for the purpose of filing an application for approval of a transaction on economic concentration is the volume of supplies of goods (works, services) in the commodity market in question.
An additional criterion is the volume of production of the product on the market (minus the volume of consumption of the product in the production process and the volume of inventories), but this criterion is applied only if the use of the first criterion is impossible.
Information on the volume of the commodity market in the Republic of Belarus or region can be requested from the following authorities:
1) state statistics bodies;
2) customs authorities (volume of imports, exports);
3) tax authorities;
4) other organs.
To obtain information from state statistics bodies, a business entity applies to the Republican Unitary Enterprise “Information and Computing Center of the National Statistical Committee of the Republic of Belarus” with a corresponding application. Information is provided at on a paid basis based on the concluded agreement. In the application, the market volume is requested by the corresponding OKED code. For wholesale trade, you can also additionally request information using the statistical classifier code SK 09.003-2015 “Goods wholesale trade"(hereinafter referred to as the code of wholesale goods). In this case, state statistics bodies will provide the sales volume for a particular product, which will make it possible to more accurately calculate the share of a business entity in the product market. The market volume is requested for the Republic of Belarus and (or) region (depending on the geographical boundaries of the market in which the organization operates) based on the results of the year preceding the year of filing the application in MART, as well as based on the results of the last reporting quarter of the year of filing the application in MART.
6. Rules for calculating the share
By general rule the share of an economic entity in the commodity market is calculated as the ratio of the volume of supply of goods (work, services) by an economic entity to the commodity market of the Republic of Belarus (regions (Minsk)) to the total volume of the commodity market based on data received from state statistics bodies and (or) other government agencies as of the last date of the reporting period<*> .
If it is impossible to calculate the share of an economic entity in the commodity market, according to the general rule, its share is calculated as the ratio of the volume of production of goods by the economic entity within the geographical boundaries of the commodity market of the Republic of Belarus (regions (Minsk)) (minus the volume of consumption of goods in the production process and the volume of inventories ) minus the volumes of export (export) of goods from the relevant territory and with the addition of volumes of import (import) of the goods in question to the corresponding territory to the total volume of the commodity market based on data received from state statistics bodies and (or) other government bodies as of the last date of the reporting period period. We believe that this procedure for calculating the share can be applied to organizations whose main activity is production, while the sales volume of the produced goods is, for some reason, relatively small, and the bulk of the produced goods, for example, are stored in warehouses. In this case, calculating the share by production volume will more realistically reflect the share of a business entity in the market than calculating the share by volume of supplies.
Thus, to calculate the share in the product market, statistical data obtained from authorized organizations is used, and information from the business entity itself on the volume of supply of goods (services, works), export and import of products is also taken into account. All this data, as well as a description of how the share was calculated, must be submitted to the antimonopoly authority when submitting an application for approval of a transaction on economic concentration.
An example of calculating the share of a business entity
The main activity carried out by LLC "A" is the wholesale trade of electronic and communication equipment and their parts (OKED code 46520, wholesale product code 46.52.12). LLC "A" operates throughout the territory of the Republic of Belarus. The RUE “Information and Computing Center of the National Statistical Committee of the Republic of Belarus” requested information on the volume of supplies in the Republic of Belarus for 2016 for the wholesale trade of electronic and communication equipment and their parts (OKED code 46520, wholesale product code 46.52.12).
In accordance with the information provided by the Republican Unitary Enterprise “Information and Computing Center of the National Statistical Committee of the Republic of Belarus”:
— the volume of supplies in the Republic of Belarus for the wholesale trade of electronic and communication equipment and their parts according to OKED code 46520 for 2016 amounted to 105,951,000 (one hundred five million nine hundred fifty-one thousand) Belarusian rubles (excluding VAT);
— the volume of revenue from supplies to the commodity market by wholesale trade organizations of electronic equipment and its parts (wholesale trade product code 46.52.12) in the Republic of Belarus for 2016 amounted to 253,924,600 (two hundred fifty-three million nine hundred twenty-four thousand six hundred) Belarusian rubles (excluding VAT) .
In turn, the total volume of goods supplied by LLC “A” for the wholesale trade of electronic and communication equipment and their parts according to OKED code 46520 without VAT for 2016 amounted to 3,000,000 (three million) Belarusian rubles.
The total revenue of LLC A from supplies to the commodity market of electronic equipment and its parts without VAT for 2016 amounted to 3,000,000 (three million) Belarusian rubles.
Thus, the share of LLC “A” in the market of the Republic of Belarus for the wholesale trade of electronic and communication equipment and their parts according to OKED code 46520 for 2016 amounted to 2.8% (3000000 / 105951000 * 100) and, in particular, of the total revenue for the supply of electronic equipment and its parts (wholesale product code 46.52.12) for 2016 - 1.18% (3000000 / 253924600 * 100).
The share is calculated in the same way based on the results of the corresponding quarter of the year the application was submitted. At the same time, please note that the share at the end of the quarter may differ significantly from the share at the end of the year and be several times larger. This is due to the fact that statistical authorities provide information for the current year without taking into account data from microorganizations and small organizations. Micro-organizations and small organizations submit reports to the National Statistics Committee annually (rather than quarterly). When submitting an application to MART, we recommend explanatory note MART should pay attention to this circumstance.
To summarize, I would like to note that the correct calculation of the share of a business entity in the relevant product market is the key to prompt consideration by the antimonopoly authorities of an application for approval of a transaction. If, when calculating the share, the share turns out to be quite significant, the business entity should think more carefully about the justification of the need for the transaction and the absence of the risk of worsening competition in the market after the transaction.
It does not work Editorial from 20.12.1996
| Name of document | ORDER OF THE RF SCAP dated December 20, 1996 N 169 "ON APPROVAL OF THE PROCEDURE FOR ANALYSIS AND ASSESSMENT OF THE STATE OF THE COMPETITIVE ENVIRONMENT IN PRODUCT MARKETS" |
| Document type | order, order |
| Receiving authority | State Capital Cap of the Russian Federation |
| Document Number | 169 |
| Acceptance date | 01.01.1970 |
| Revision date | 20.12.1996 |
| Registration number in the Ministry of Justice | 1229 |
| Date of registration with the Ministry of Justice | 01.01.1970 |
| Status | It does not work |
| Publication |
|
| Navigator | Notes |
ORDER OF THE RF SCAP dated December 20, 1996 N 169 "ON APPROVAL OF THE PROCEDURE FOR ANALYSIS AND ASSESSMENT OF THE STATE OF THE COMPETITIVE ENVIRONMENT IN PRODUCT MARKETS"
EXAMPLE OF CALCULATING THE SHARE OF AN ECONOMIC ENTITY IN A PRODUCT MARKET (CONDITIONAL)
1.1. Definition of goods and substitute goods.
The plant produces products industrially - technical purpose- perlite-phosphogel slabs and perlite-plastic concrete slabs.
Thermal insulation materials used in building structures also include mineral wool boards, perlite cement boards, and polystyrene foam boards produced at other factories.
In terms of their purpose and consumer properties, all of the listed materials are interchangeable products: they are used in building structures for thermal insulation. The interchangeability of the listed thermal insulation materials is confirmed by the expert opinion of industry research organizations. In order to verify the results of the examination, a survey of buyers of the Plant's products is conducted.
Based on this conclusion, all of the above thermal insulation boards can be classified as one product group of thermal insulation materials.
II. Definition of market subjects
2.1. Buyers of perlite-phosphogel and perlite-plastic concrete slabs produced by the Plant:
The share of an economic entity must be determined in each market. In this case, since the share of retail buyers in the Plant’s sales volume is insignificant, we will limit ourselves to assessing the share of the business entity in question only in the market for wholesale purchases of perlite phosphogel and perlite plastic concrete slabs and their substitutes.
2.2. The enterprises are sellers of perlite-phosphogel and perlite-plastic concrete slabs and their substitutes.
As a result of a survey of buyers of the Plant’s products, 4 additional sellers were identified:
Perlite cement boards - plants A and B
Mineral wool boards - plant B
Expanded polystyrene boards - plant G.
III. Geographical boundaries of the product market
The geographic boundaries of the market are the areas of the region in which the identified sellers of thermal insulation materials operate.
Let us assume that the total volume of sales of perlite-plastic concrete and perlite-phosphogel slabs by all five plants in the market under consideration amounted to certain period time 100,000 sq. m, and the volume of sales of these slabs by the Plant for the same period of time is 26,000 sq. m.
Accordingly, the Plant’s share in the market of thermal insulation materials was 26%.