N4 Entrepreneurship & Business Management


Activity 5 Calculate the market share of the following businesses:


Blondie intends rendering a hairdressing service to the clients in Parktown. There are 2800 families in the area. The average income per annum per family amounts to R6 500. Blondie estimates that each family spends 1,5% of their yearly income on hairdressing services. Blondie believes that she will enjoy a market share of 15% of the total market.


Calculate, showing all the calculations, Blondie’s potential market share.


JUST IN


You are in the position to open a small supermarket in an area where 20 000 people from the lower income group live. There are two competitors approximately 3 km apart from each other as well as from your intended site. However, there is a large Pick ‘n Pay Hypermarket approximately 2km from your site and 5km from your competitors. Your intended site is right opposite a large block of flats, a cinema and a petrol station. Using the information and making any assumptions you like, answer the following questions:


1. What is your total market potential in Rands? 2. What is the Rand value of your target market? 3. What is your expected market share in Rands? 4. What is your expected annual turnover?


Alternative method of calculating market share


It is often not possible to get all the information you need to enable you to calculate your market share and thus whether your business can make a profit. If this happens, then an alternative is the costing method. In other words, you calculate how much it will cost you to operate your business, including the salary you would pay yourself. Your next step is to calculate what your sales figure should be, to at least cover all these costs. This is also called your break-even point. You only need to take note of this since it will be discussed later.


2.2.4 Indicators of market growth


Most entrepreneurs dream about expanding their business even before they have started one. If expanding your business is part of your dream then it is important to start the “right” type of business. “Right” implies that it is either possible to increase your market at the expense of your competition or that your market is growing. This means that the number of customers who use your product or service is growing all the time. Growing markets are the result of various factors but there are a few indicators that can guide the entrepreneur. The following are a few examples:


PAUSE FOR THOUGHT


An alternative method of calculating market share is to calculated your breakeven point and then to “decide” whether the market is big enough.


50


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