The Great Fragmentation: And Why the Future of All Business is Small

CHAPTER 18 Market-share folly and industrial fragmentation: industrial metrics

The development of modern marketing and all forms of corporate management has led to a set of metrics that enable managers to assess how well they, their brands and their company are doing. Most are borrowed from nature, from the basic measurement tools we used in the agrarian society to ensure we had enough to eat or trade in the subsequent season. They make sense now and they’ll make sense a thousand years from now. Simple models of assessment such as yield and growth rates spring to mind. But one that is an industrial-era measure is that of market share. How much of a market does a brand or company hold in percentage terms? Is it increasing or decreasing and what does that tell us about the relative performance?

Market-share folly

The problem with using market share as a measure is that it can provide companies with a false sense of what’s actually occurring in the market. For market share to be measured, a set of assumptions used to build the measurement framework is needed. Companies first require the following elements:

• They have to clearly define the market.
• The market must be defined in terms of a product or service.
• The market is then often split into smaller product or service segments of the wider market.
• There must be clear distribution channels, from where their sales come, from which market share can be measured.
• There must be a defined set of competitors who also serve that market. ...