Question

Allison has a horse stall cleaning business that has been growing rapidly since she started it three years ago. She estimates the total number of horse stalls in her market to be 5000, owned by a total potential population of 1500. Currently, there are only two competitors in the market, Allison, who has 439 stalls that she cleans, and Sam's Hayfaring Maneger, that cleans 1,450 stalls. The remainder of the stalls are cleaned by their owners rather than by a service. Allison prices her cleaning services at $11 per stall per month and Sam charges $8 for the same service. Allison's sales are derived from 136 customers while Sam's are from 54 customers, meaning that Sam's customers have more stalls on a per capita basis.
1. What is the market penetration rate based on potential customers
2. What is Allison's unit market share (based on stalls cleaned)?
3. What are Allison's monthly revenues?
4. What is Allison's revenue market share?
5. What is Allison's relative market share based on units?

Answer 1

Answer and Explanation:

The computation is shown below:

1. Market penetration rates

For alison = 136 ÷1500 = 9.07%

For Sam = 54  ÷ 1500 = 3.6%

So, Total market penetration based on potential customers is

= 9.07% + 3.6%

= 12.67%

2. alison's unit market share is

= alison's business ÷ total business in market

= 439  ÷ (439 + 1450)

= 23.24%

3. alison's revenue is

= $11 × 439

= $4,829

4 alison's revenue market share is = alison's revenue ÷ total revenue

= $4,829 ÷ ($4,829 + 8 × 1450)

= 29.39%

5 relatve market share is

= alison's market in terms of units ÷ competitor's market share in term of units

= 0.2324 ÷  (1 - 0.2324)

= 30.32%