How Is The Rise Of Market Shares Affecting Small Businesses?

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How Is The Rise Of Market Shares Affecting Small Businesses?

Although global indexes have witnessed several fluctuations and a great deal of uncertainty throughout the course of 2015, it looks as though shares in major markets are now on the rise. Following strong corporate reports in the United States and Europe – as well as better-than-expected results from major organisations – there is now a newfound confidence among investors as the new year approaches.

However, as any investor will know, the detail and specifics are crucial. A broad brush image of the market is never enough on its own to sum up the picture for each sector and individual businesses. You need a decent knowledge of a glossary of trading terms to get by and gain a thorough understanding of how it will affect you, especially if your interest lies with a firm outside of the FTSE100.

Even if a company isn’t listed on the stock exchange, it can still reap the rewards of rising market shares, for example. But why is this the case?

Ways in which market shares affect small businesses

Small business owners might not give major corporations a second thought when going about their daily routines, but the performance of global stock markets can have a massive knock-on effect in a variety of ways. These include:

  • Credit – In order to buy your goods and services, the consumer needs credit. This is generally borrowed from the same financial institutions that have a say in determining interest rates. If market shares are rising, there is less uncertainty over risk and interest rates remain low. Borrowing becomes cheaper and easier, enabling your customers to spend more.
  • Consumer behavior – Even if your customers don’t buy stocks and shares, they still have a vested interest in global markets, as this is where assets like pensions can be found. Any movement or fluctuations will affect this personal wealth and change the consumer’s behavior towards spending. When market shares rise, consumers know they can rely on a valuable nest egg in the future and will be more willing to spend their money in the short-term.
  • Competition – When market shares rise, borrowing is easier, consumers start spending, and revenue increases. However, this can be said for all organisations, not just your own. Industry rivals may feel they can afford to drop their prices and offer special deals, as the economic climate will still provide them with plenty of profit. Therefore, you will need to act accordingly and always stay one step ahead of the game. If big businesses thrive there is also the chance for smaller outfits to supply goods and services to them and cash in on increased spending, for example.

Example of how small businesses are capitalizing on rising market shares

Despite the fact you will find most of the world’s wealth within global stock markets, small businesses are now beginning to outperform the biggest brands thanks to market share rises.

It has been revealed that a tiny group of “high-growth small businesses” created an average of 4,500 new jobs each week in 2014, three times as many as the entire FTSE 100. Representing just one per cent of UK businesses, these organisations also generated 36 per cent of economic growth in 2013 too.

Since the 2008 financial crisis, the UK’s slow-yet-steady recovery has enabled market shares to gradually increase. But along with benefiting public companies, this progressive prosperity has also enabled privately held small businesses – many set up by entrepreneurial pioneers who used the recession as an opportunity to go it alone – to thrive as well.

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Bill is a journalism graduate with a passion for writing and a thirst for knowledge. He's worked and written for a number of high profile magazines and websites since finishing university in 2014.