The current actual sales of the industry within which the company competes.

To completely define a market, the definition must contain at least the following elements:

• Product and/or service
• Geographic area
• Customer (and secondary customer if appropriate)
• Level in value chain

Markets can be defined at many levels (sizes). Any market definition must include most of the firm’s business (unless it plans to divest parts of its business). The specific market chosen is an important factor in determining competitive strategy.

Examples (of levels):

1. Men's apparel, 2. Men's sporting apparel, 3. Men's sweatshirts.

1. Restaurants, 2. Fast food restaurants, 3. Mexican fast food restaurants.

The sales of the company in the defined market compared with total sales in that market.

In most mature markets, three to five companies hold around 70% of the market. The remaining 30% of the market is usually divided among many (frequently thousands) of very small firms.

If the organization is one of the large companies, it should stay in its market, provide a broad product line, and compete using Porter's low cost strategy, selling to the large middle market (perhaps extending to the high and/or low ends).

If the organization is one of the small firms, it is at a significant scale disadvantage and generally should not attempt to compete head-on with the large firms. Small firms should redefine part of the large market into a smaller market (a niche). Such a redefinition would be consistent with Porter's "focus" or "differentiation" strategies. After redefining, the company would then be one of the large companies within the smaller market, and should then follow the large company strategy within that market.

Organizations normally should not expand beyond their market, but should stay within it. If, however, a firm dominates its market and desires to grow faster than the growth of the market, then it can follow one of the following two strategies:

• Expand the definition of its market slowly to include additional areas. Any of the four defining factors can be used.
• Seek similar and related (product or customer) niches. Preferred expansion niches are growing at an acceptable rate and have fragmented (and smaller) competitors.