Those of you who are in the business and investment world, of course, are familiar with the terms market share and market capitalization. Although both are often discussed, it is important to be able to know the difference between the two, especially for business or startup owners.
This not only needs to be understood by business people or investors, but also company executives who are involved in funding. Therefore, let's look at the following review to find out the difference between market share and market capitalization.
What is Market Share?
Market share is the total value of customer purchases of a company's product, both goods and services, compared to the total product in a particular industry.
Market share can be understood as the percentage of the company's total sales of the total value of products in the industry. Apart from that, here are some things you need to know about market share:
It should be understood that controlling 100% of the market share is not a good thing for the company. This is due to the risk of changing trends in the market caused by changes in consumer tastes, fashions, and other aspects.
What is Market Capitalization?
Market capitalization is a term that refers to the aggregate valuation of a company based on the current share price and the total number of shares outstanding. This value is obtained by multiplying the current share price of the company by the total outstanding shares of the company.
Knowing the market capitalization of a company can help investors to know the potential return and risk of its shares. The greater the market cap value of a company, the more likely investors are to invest
Market capitalization is formed when the shares of a company are traded to the public through an initial public offering or known as an IPO (Initial Public Offering). In the stock market, stock price movements are determined by the amount of demand and supply.
How to determine the market capitalization of a company? In short, calculating the company's market cap is done as follows:
Market Cap = Total Shares Outstanding x Share Price per share
You may be wondering, why is there a need for market capitalization itself? Here are some things that show that market capitalization is an important thing for companies.
In practice, there are types of stocks that are distinguished based on the value of market capital. Citing an article from the American Journal of Humanities and Social Sciences Research (AJHSSR), there are three types of stocks, namely:
1. Blue Chip/Big Cap
It is a company with a capitalization value of more than Rp. 100 trillion. Blue chip stocks are also known as tier one stocks whose performance will greatly affect the overall JCI. In general, blue chip stocks are owned by companies with excellent financial conditions that have been operating for a long time.
2. Middle Tier Shares/Middle Cap
Namely companies whose capitalization is in the figure of IDR 1-5 trillion. Companies that fall into this category are often considered as companies with stable economic conditions and are in the process of developing.
3. Small Cap Shares/Small Chip
Refers to companies with a capitalization value below Rp1 trillion. Stock price movements in this category tend to be more volatile or volatile with relatively low prices.
Before investing in a company's stock, it is important to know the value of the company, both in terms of market share and market capital. Investors must be able to maintain investment portfolios from companies with healthy market capitalization. Therefore, companies that have entered the stock exchange must also maintain the stability of the company's value in order to be able to attract the attention of investors in providing funding.
Those of you who are in the business and investment world, of course, are familiar with the terms market share and market capitalization. Although both are often discussed, it is important to be able to know the difference between the two, especially for business or startup owners.
This not only needs to be understood by business people or investors, but also company executives who are involved in funding. Therefore, let's look at the following review to find out the difference between market share and market capitalization.
What is Market Share?
Market share is the total value of customer purchases of a company's product, both goods and services, compared to the total product in a particular industry.
Market share can be understood as the percentage of the company's total sales of the total value of products in the industry. Apart from that, here are some things you need to know about market share:
It should be understood that controlling 100% of the market share is not a good thing for the company. This is due to the risk of changing trends in the market caused by changes in consumer tastes, fashions, and other aspects.
What is Market Capitalization?
Market capitalization is a term that refers to the aggregate valuation of a company based on the current share price and the total number of shares outstanding. This value is obtained by multiplying the current share price of the company by the total outstanding shares of the company.
Knowing the market capitalization of a company can help investors to know the potential return and risk of its shares. The greater the market cap value of a company, the more likely investors are to invest
Market capitalization is formed when the shares of a company are traded to the public through an initial public offering or known as an IPO (Initial Public Offering). In the stock market, stock price movements are determined by the amount of demand and supply.
How to determine the market capitalization of a company? In short, calculating the company's market cap is done as follows:
Market Cap = Total Shares Outstanding x Share Price per share
You may be wondering, why is there a need for market capitalization itself? Here are some things that show that market capitalization is an important thing for companies.
In practice, there are types of stocks that are distinguished based on the value of market capital. Citing an article from the American Journal of Humanities and Social Sciences Research (AJHSSR), there are three types of stocks, namely:
1. Blue Chip/Big Cap
It is a company with a capitalization value of more than Rp. 100 trillion. Blue chip stocks are also known as tier one stocks whose performance will greatly affect the overall JCI. In general, blue chip stocks are owned by companies with excellent financial conditions that have been operating for a long time.
2. Middle Tier Shares/Middle Cap
Namely companies whose capitalization is in the figure of IDR 1-5 trillion. Companies that fall into this category are often considered as companies with stable economic conditions and are in the process of developing.
3. Small Cap Shares/Small Chip
Refers to companies with a capitalization value below Rp1 trillion. Stock price movements in this category tend to be more volatile or volatile with relatively low prices.
Before investing in a company's stock, it is important to know the value of the company, both in terms of market share and market capital. Investors must be able to maintain investment portfolios from companies with healthy market capitalization. Therefore, companies that have entered the stock exchange must also maintain the stability of the company's value in order to be able to attract the attention of investors in providing funding.
