CS Professional · Strategic Management and Corporate Finance · Managing the Multi-Business Firm and Analyzing Strategic Edge
Relative market share in the BCG matrix is normally calculated as:
Relative market share is the business unit's sales divided by the sales of its largest competitor. It differs from absolute share, which uses total industry sales. A ratio above 1 means the unit is the market leader, which is why the BCG dividing line is typically 1.
- AThe firm's sales divided by total industry sales
- BThe firm's sales divided by the sales of its largest competitorCorrect
- CThe firm's market growth rate divided by the industry growth rate
- DThe firm's profit divided by the largest competitor's profit
Explanation
Relative market share compares the business unit's share with that of its strongest rival, i.e. sales of the unit divided by sales of the largest competitor. Dividing by total industry sales gives absolute market share, which is the key distractor. A value above 1 indicates market leadership.
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