Login

Market Size: Definition & Explanation

An error occurred trying to load this video.

Try refreshing the page, or contact customer support.

Coming up next: Marketing Implementation: Example Plans & Strategies

You're on a roll. Keep up the good work!

Take Quiz Watch Next Lesson
 Replay
Your next lesson will play in 10 seconds
  • 0:00 Market Size Defined
  • 0:22 Estimating Market Size
  • 1:33 Reviewing the Opportunity
  • 2:46 Lesson Summary
Add to Add to Add to

Want to watch this again later?

Log in or sign up to add this lesson to a Custom Course.

Login or Sign up

Timeline
Autoplay
Autoplay
Create an account to start this course today
Try it free for 5 days!
Create An Account

Recommended Lessons and Courses for You

Lesson Transcript
Instructor: Michael Cozad

Michael is a financial planner and has a master's degree in financial services.

In this lesson, we will define market size and explain how the term is used. Learn how to estimate market size and how this can be used to identify potential business opportunities.

Market Size Defined

Have you heard the phrases 'the market for this is' or 'the market for that is' and wondered the meaning? Market size is a measurement of the total volume of a given market. For now, think of market size in terms of a pie chart (think of a circle). The entirety of the circle represents the market size.

Estimating Market Size

Let's say XYZ Company was contemplating expanding their operations. They make widgets currently but want to explore the possibility of making gizmos. The company needs to calculate the market size for gizmos prior to commencing production.

In an attempt to calculate market size, XYZ Company looked at sales by their competitors and also analyzed the end user - the consumer. XYZ Company calculated that the current market size of gizmos was $100 million in 2014 in the United States. By reviewing sales statistics from their competitors, they learned that ABC Company had 2013 sales of $40 million, and DEF Company had 2013 sales of $20 million.

Since the market size of gizmos is $100 million, and since XYZ Company learned that both ABC Company's and DEF Company's production lines were behind schedule (sales were backed up for months), XYZ Company may be making a wise decision in filling in the $40 million gap in market size. Each company's respective 'piece of the pie' in the market size is their market share.

Reviewing the Opportunity

Before beginning production, XYZ Company analyzed the market size graphic seen here:

Graphic for Example
graphic for example

The company predicted that the market size would be unchanged for 2014, and thus decided to enter production after having received results that if their plans were to succeed, the company would be profitable.

It is important to note that the term 'market size' can be very broad. Therefore, it is important to identify the context in which terms are being used. For example: time period, date, geographic region, units. As can be seen in the graphic, the time period is one year (2013). The date is also identified as 2013. The geographic region is the United States. Units are identified in the graph but have been disclosed in the text as dollars. $100 million is the market size.

To unlock this lesson you must be a Study.com Member.
Create your account

Register for a free trial

Are you a student or a teacher?
I am a teacher
What is your educational goal?
 Back

Unlock Your Education

See for yourself why 10 million people use Study.com

Become a Study.com member and start learning now.
Become a Member  Back

Earning College Credit

Did you know… We have over 95 college courses that prepare you to earn credit by exam that is accepted by over 2,000 colleges and universities. You can test out of the first two years of college and save thousands off your degree. Anyone can earn credit-by-exam regardless of age or education level.

To learn more, visit our Earning Credit Page

Transferring credit to the school of your choice

Not sure what college you want to attend yet? Study.com has thousands of articles about every imaginable degree, area of study and career path that can help you find the school that's right for you.

Create an account to start this course today
Try it free for 5 days!
Create An Account
Support