IB Business Management HLTopic 4 — MarketingPaper 1 & 2Core skill~10 min read
Market Share and Market Growth
These are the two numbers that tell you whether marketing is working. Market share asks “how big a slice do we get?” Market growth asks “is the whole cake getting bigger?” They are easy marks — as long as you keep the two formulas apart, which is exactly where most students slip.
📘 What you need to know
Sales volume = number of units sold. Sales value (revenue) = price × quantity sold.
Market share = one business’s sales as a percentage of total market sales.
Market growth = the change in the size of the whole market, as a percentage of last year.
Share is about you against your rivals. Growth is about the market as a whole. They can move in opposite directions.
The market leader holds the largest share of a market.
Market concentration shows how much of a market a few big firms control. High concentration = little competition (an oligopoly).
Always show your working. Method marks are given even when the final number is wrong.
First, how do you measure a market’s size?
There are two honest answers, and they can tell different stories.
Sales volume counts things: 40,000 coffees sold.
Sales value counts money: 40,000 coffees at $3.50 each = $140,000 of revenue.
Why does it matter? Imagine a coffee shop sells fewer cups this year but raises its prices. Volume falls, value rises. If you only look at one number you get the wrong picture of the business.
Sales revenue
Sales revenue = price × quantity sold
Read the question wording carefully. “By volume” means units. “By value” means money. Market share can be calculated either way, and the two answers are often different.
Market share
Market share tells you how much of the market belongs to one business. It is always a percentage, and every business in the market adds up to 100%.
Market share formula
Market share (%) = (sales of one business ÷ total market sales) × 100
Notice that Brew Co leads without being anywhere near half the market. Leadership only means the biggest slice, not most of the cake.
WORKED EXAMPLE 1
The coffee market in one town is worth $12.5m a year. Brew Co’s sales were $1.8m. Calculate Brew Co’s market share to two decimal places. [4 marks]
Step 1: Identify the sales of the business$1.8mStep 2: Identify the size of the whole market$12.5mStep 3: Put them into the formula(1.8 ÷ 12.5) × 100Step 4: Work it out and round0.144 × 100 = 14.4Market share = 14.40%Both figures are in millions, so the units cancel. Never mix $m with $ — that is the classic lost mark.
Market growth
Market growth ignores individual businesses completely. It measures whether the whole market got bigger or smaller compared with last year.
Market growth formula
Market growth (%) = ((this year’s market sales − last year’s market sales) ÷ last year’s market sales) × 100
The market grows every year here, but not evenly. A business that assumed the 2022 growth rate would continue would have badly over-ordered stock in 2024.
WORKED EXAMPLE 2
The market was worth $6.25m in 2021 and $7.40m in 2022. Calculate the rate of market growth. [2 marks]
Step 1: Take last year away from this year7.40 − 6.25 = 1.15Step 2: Divide by last year’s figure1.15 ÷ 6.25 = 0.184Step 3: Multiply by 1000.184 × 100 = 18.4Market growth = 18.4%You always divide by the older year. Divide by the newer one and the answer will be close enough to look right, but it is wrong.
WORKED EXAMPLE 3
A market was worth $640,000 last year and is expected to grow by 12%. Calculate the predicted size of the market. [2 marks]
Step 1: Find 12% of last year’s figure0.12 × 640,000 = 76,800Step 2: Add it on to last year640,000 + 76,800 = 716,800Predicted market = $716,800This one runs the growth formula backwards. If you are given the growth rate, you are being asked for a percentage increase.
Share and growth can move opposite ways
This is the idea examiners love, and it catches people out every year. A business can lose market share while its sales are rising.
Say the market doubles in size but your sales only go up by a quarter. You are selling more than ever, so revenue is up and the owner is delighted — but your slice of the market has shrunk, because rivals grabbed most of the new customers. Long term, that is a warning sign, not a success.
If an exam case shows rising sales and falling market share, that is your evaluation point handed to you on a plate. Say it out loud in your answer: the business is growing more slowly than its market.
Market leadership and market concentration
The market leader is the business with the biggest share. That position brings real advantages, but also real pressure — everyone is aiming at you.
Market concentration measures how much of a market a handful of firms control:
High concentration — a few firms hold most of the market. Competition is weak and prices tend to stay high. A market like this is called an oligopoly.
Low concentration — share is spread across many sellers. Competition is fierce and prices get pushed down.
Advantage of leading
Why it happens
Brand recognition
Shoppers reach for the name they already trust, which builds loyalty and repeat buying
Economies of scale
Making more units lowers the cost of each one, so margins can be wider than rivals’
Money to innovate
Bigger profits fund research, which keeps the business one step ahead
Better distribution
Retailers want the best-selling brand on their shelves, so it reaches more customers
Attracts good staff
People want to work for a well-known, successful employer, which raises quality further
The other side: leaders are watched constantly by the media, shareholders and competition regulators, and every rival is designing a product specifically to beat them.
💡 Exam tip
Write the formula down before you touch the calculator. That is a mark on its own, even if the arithmetic goes wrong.
Check the units match. $328m and $4.6bn are not the same size — convert one before dividing.
Round only at the end, and only to the number of decimal places the question asks for.
Put a % sign on your final answer. Examiners do take the mark off.
If asked to comment on a result, say what it means for the business, not just what the number is.
Learn the difference in one line: share is a slice, growth is the whole cake.
⚠ Common mix-up
Dividing by the wrong year in the growth formula. It is always last year on the bottom.
Confusing share with growth. A firm’s own sales growth is not market growth.
Assuming market leader means most of the market. A leader can hold 20% in a crowded market.
Forgetting to multiply by 100. An answer of 0.144 is a decimal, not a percentage.
Mixing volume and value in the same calculation. Both numbers must be measured the same way.
Treating high market share as automatically good. Share bought through heavy discounting can destroy profit.
Up next: Putting a Marketing Plan Together — the four parts of a marketing plan, plus segmentation, targeting and market mapping.
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