<p>As stated in the title: <strong>How is the market share of a firm calculated <em>in practice</em>?</strong></p>
<p>By emphasizing &quot;in practice&quot;, I'm most interested in the market share figures that show up in companies' annual reports, industry research publications, and news articles, etc. For example, <a href="https://www.statista.com/statistics/1168529/global-apple-market-share-2020/" rel="nofollow noreferrer">Apple's share in the smartphone market is 15% in Q2 of 2021</a>. I'd like to know how that &quot;15%&quot; figure comes about.</p>
<p>Specifically, I'm looking for answers that address the following aspects:</p>
<ul>
<li><p>How is a &quot;market&quot; defined in practice? Is it based on <a href="https://siccode.com/sic-code-lookup-directory" rel="nofollow noreferrer">SIC codes</a> / <a href="https://www.census.gov/naics/?58967?yearbck=2017" rel="nofollow noreferrer">NAICS codes</a>?</p>
</li>
<li><p>Where do the data come from? Theoretically, the market share of Firm <span class="math-container">$i$</span> in market <span class="math-container">$M$</span> is given by <span class="math-container">$$\frac{\text{Sales}_i}{\sum_{j\in M}\text{Sales}_j}\,.\tag{1}$$</span> I imagine one would go to a data provider like Bloomberg or Compustat to pull revenue information of the firms classified under market <span class="math-container">$M$</span>, e.g. by a particular SIC code,  and use that to calculate the denominator of <span class="math-container">$(1)$</span>. But how could one be sure that Bloomberg has information on <em>all</em> the firms in market <span class="math-container">$M$</span>, or at least all those with a material amount of sales? What if one of the major players in market <span class="math-container">$M$</span> is privately held and does not disclose its financial information to the public (i.e. Bloomberg won't have this firm's sales data)? Then calculating the market share with data only from Bloomberg would be biased because the denominator is inaccurate. How is this issue of not capturing potentially influential players who don't disclose financial information publicly addressed in practice?</p>
</li>
</ul>

CC BY-SA 4.0
2021-11-24T04:54:14.623Z
(Background: I have worked at a national competition authority.) "*How is a "market" defined in practice?*" I am not sure about the exact type of publication you are interested in, but it seems like with the broad net that you cast this will depend on the purpose for which the market share data will be used for.
Giskard
CC BY-SA 4.0
2021-11-24T16:04:12.120Z
@Giskard: Thanks. Would you be able to share one or two examples of how a market is defined based on publication type, perhaps other than SIC/NAICS codes? I have a feeling that there is a lot of ad hocness in such definitions, based on the info I've seen so far.
Herr K.
CC BY-SA 4.0
2021-11-24T17:59:49.593Z
I don't know any examples on how the publications calculate this, I only read & heard about approaches that competition authorities used. Those were quite heterogeneous in methodology (dependant on the goal of the investigation), but the data sources were usually the companies themselves. (Everyone reporting on themselves and their competitors, the authority checking consistency.)
Giskard
CC BY-SA 4.0
2021-11-24T18:22:10.297Z
@Giskard: Thanks. This is helpful and partially answers my question, albeit in a negative way. You may consider turning your last comment into an answer.
Herr K.
<reference-request><industrial-organisation><empirical-methods>
How is market share of a firm calculated *in practice*?
Herr K.
# How is market share of a firm calculated *in practice*?

(Asked by: username_0 on 2021-11-23)

As stated in the title: **How is the market share of a firm calculated *in practice*?**

By emphasizing "in practice", I'm most interested in the market share figures that show up in companies' annual reports, industry research publications, and news articles, etc. For example, [Apple's share in the smartphone market is 15% in Q2 of 2021](https://www.statista.com/statistics/1168529/global-apple-market-share-2020/). I'd like to know how that "15%" figure comes about.

Specifically, I'm looking for answers that address the following aspects:

* How is a "market" defined in practice? Is it based on [SIC codes](https://siccode.com/sic-code-lookup-directory) / [NAICS codes](https://www.census.gov/naics/?58967?yearbck=2017)?
* Where do the data come from? Theoretically, the market share of Firm $i$ in market $M$ is given by $$\frac{\text{Sales}\_i}{\sum\_{j\in M}\text{Sales}\_j}\,.\tag{1}$$ I imagine one would go to a data provider like Bloomberg or Compustat to pull revenue information of the firms classified under market $M$, e.g. by a particular SIC code, and use that to calculate the denominator of $(1)$. But how could one be sure that Bloomberg has information on *all* the firms in market $M$, or at least all those with a material amount of sales? What if one of the major players in market $M$ is privately held and does not disclose its financial information to the public (i.e. Bloomberg won't have this firm's sales data)? Then calculating the market share with data only from Bloomberg would be biased because the denominator is inaccurate. How is this issue of not capturing potentially influential players who don't disclose financial information publicly addressed in practice?

**Tags:** reference-request, industrial-organisation, empirical-methods

> **Comments:**
> **username_1**: (Background: I have worked at a national competition authority.) "*How is a "market" defined in practice?*" I am not sure about the exact type of publication you are interested in, but it seems like with the broad net that you cast this will depend on the purpose for which the market share data will be used for.  
> **username_0**: @username_1: Thanks. Would you be able to share one or two examples of how a market is defined based on publication type, perhaps other than SIC/NAICS codes? I have a feeling that there is a lot of ad hocness in such definitions, based on the info I've seen so far.  
> **username_1**: I don't know any examples on how the publications calculate this, I only read & heard about approaches that competition authorities used. Those were quite heterogeneous in methodology (dependant on the goal of the investigation), but the data sources were usually the companies themselves. (Everyone reporting on themselves and their competitors, the authority checking consistency.)  
> **username_0**: @username_1: Thanks. This is helpful and partially answers my question, albeit in a negative way. You may consider turning your last comment into an answer.  

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## 0 answers

