hi there in this short video we're going to take a look at how you calculate an important concept in market analysis it's a concept called market growth now don't forget the market growth is just one of several important pieces of analysis or calculations that are often undertaken to try to understand how attractive a market is and who and which businesses have the share of that market so we'll just focus in this video on the maths the numbers of how to calculate the growth rate in subsequent videos we'll take a look at strategies that firms adopt to try to take advantage of markets that have high growth rates market growth it's important to remember that this is a percentage change we're looking at the change in the size of the market could be a market segment it could be a large market we're looking at the change of that size between different periods don't forget that the market can also be measured in different ways it can be measured in terms of the total value of sales for example it could be the total value of profits and a common way of looking at market size is to look at how many or the volume of products are sold in the market between one period and another here's just a couple of examples to illustrate some real life examples of how markets grow over time or decline in value and volume over time here's an interesting one this is a chart that shows the total volume of smartphones that have been sold around the world over the last seven years and this is a volume measure so you can see from the y-axis that the chart is displaying shipments in millions of units so in 2009 173 million smartphones were sold which was a lot then but just look at what's happened to the market in the last six to seven years a very significant and strong percentage growth in the volume of smartphone smartphones sold such that by 2015 almost one and a half billion smartphones were bought by you and i and the rest of us around the world whether that smartphone market will continue to grow at such a fast race of course is an important question and it's one that the likes of samsung and huawei and xiaomi and apple will all be considering smartphones is a great example of a market that's been growing fast but there are lots of markets where the growth is negative in other words the market has declined in size and therefore the growth rate when we calculate it should be negative here's an example this chart shows something similar to the smartphone one it shows the total millions of pcs shipped over recent years as well as a forecast for what the analysis suggests may happen in the next few years and we can see that in 2010 157 million pcs were shipped but by 2015 that had fallen to 113 million it's a market in decline in other words a negative growth rate so the important thing to take away from those two charts is firstly you can calculate growth in different ways what you have to do is define the size of the market before you work out the numbers but also remember that markets can fall in size as well as rise so if your calculations are negative in terms of growth rate that should be indicating that the market size has fallen now calculating the percentage is relatively straightforward and there's a shortcut which i'm going to show you here which will always give you the right answer the way to do it is just to compare the two values the market size now and divide it by the market size in the period over which you wish to measure the growth so market size this period perhaps this year compared with market size last year divide one by the other take away one and multiply by a hundred should give you the correct market growth rate let's have a look so let's use the global smartphone data that we saw there from the first chart we know that in 2015 the market size was 1.4 billion units or 100 143 million units the previous year the market size was slightly lower at 1.30 billion units we divide one by the other which gives us 1.1006 we take away one which gives us 0.1006 we times by 100 and that should give me the percentage change in the market now it looks like the market has grown and indeed it has grown by 10.06 percent let's do the same thing with the global pcd pc data there where we know the market has been falling so in 2015 a market was 113 million units the previous year it was much higher 134 million units we divide one by the other gives us 0.8454 we take away one times by a hundred and you should find a negative number in this case it's minus fifteen point four six percent the market has fallen in that year by around about fifteen 15 quite a significant four now you may be given some data in a table that shows the units sold or the value or the market size over time well of course you have to do if you are going to use the traditional method of percentage change is to calculate the change between those units so i've done it for you there on the table so for example if we look at this is just a worked example it's not the same as the pc or smartphone data let's have a look uh between 2013 and 2012 there was a hundred thousand increase in the size of the market so we expressed a hundred thousand divided by a million and if you express that as a percentage that's a 10 change so that's the other way of calculating the percentage change calculate the change between the two units the two periods and divide by the base the previous period let's have a look at 2014 uh there was an increase of 250 000 that's the change divided by the previous period 1.1 million that should give you a growth rate of 22.7 percent so that's the sort of slightly longer way of calculating percentage changes you calculate the change and express as a percentage of the previous number now just finally just a quick word on index numbers you may be given some data in the form of an index table where some of the calculations have effectively been done for you don't worry about that it actually makes it quite easy to calculate the percentage change here's a really simple example just to illustrate the index number don't forget index numbers you'll always find there is a base year against which previous and subsequent periods are compared so in this case the base year is 2015 which is 100 as expressed as an index and the previous year and the next two years are therefore expressed in terms of their difference between uh the base year and the year in question so for example if we look at this 2015 as a base is 100 2016 we're told the market size was 1.05 compared with 100. if we express the index number now over the base take away 1 times by 100 it should always show what the change in the index number is which of course is five 105 index this year 100 in 2015 is a 5 change so that's market growth those are the numbers in other videos we've shown you how to calculate market size and market share and we'll return to market growth as an important concept in your marketing analysis studies