Simply put, market share is a key indicator of a company's competitiveness. When a company increases its market share, this can improve its profitability. This is because as companies increase in size, they too can scale, therefore offering lower prices and limiting their competitors' growth.

In fact, research shows that enterprises that have achieved a high share of the markets they serve are considerably more profitable than their smaller-share rivals.

There is no doubt that market share and return on investment are strongly related.

Am not sure about your mentioned 10% (market share increase) to 5% (pre-tax ROI) Payam Hanafizadeh ratio.Businesses with market shares under 10% had average pretax losses of 0.16%. The average ROI for businesses with under 10% market share was about 9%. The PIMS study shows that businesses with market shares above 40% earn an average ROI of 30%, or three times that of those with shares under 10%.

To determine the net profit margin, we need to divide the net income (or net profit) by the total revenue for the year and then multiply by 100. To determine the operating profit margin, we need to divide the operating income or operating profit by the company's total revenue and then multiply by 100.

It is my idea only that the calculation of mentioned parameters Payam Hanafizadeh is location and market specific as business conditions do differ greatly in practical terms, i.e. any general formula can only be a rule of thumb, which has to be specified for the economic research case 🔬of investigation.

Ref/

https://en.wikipedia.org/wiki/Profit_Impact_of_Market_Strategy

https://www.inc.com/encyclopedia/profit-impact-of-market-strategies-pims.html

https://www.mbaskool.com/business-concepts/marketing-and-strategy-terms/12103-profit-impact-of-marketing-strategy-pims.html

https://www.ama.org/2021/08/19/understanding-why-and-when-market-share-drives-profit/

Thanks Stephen I. Ternyik for your valuable input. There are a couple of researches in 80's and 90's indicating the proportion relation between marketshare and profit as below:

https://hbr.org/1975/01/market-share-a-key-to-profitability

https://www.emerald.com/insight/content/doi/10.1108/eb053944/full/html

Article Market share—Key to higher profitability?

However, I am not sure that by peneteration of digital technologies and emergence of new type of business models which made the context channged dramatically comparing industrial phase society, if this relation is still valid!

Payam

You have exactly hit the point Payam Hanafizadeh , with respect to rapidly changing tech-know-logical conditions and the scientific validity of established economic measurement techniques.