Let's take an analogy when you and your friend are working in a company.
At the end of 1st year, it's time for his performance appraisal, we will consider below scenarios of your friend’s annual hike.
1. Your friend gets an annual hike of less than 6%
2. Your friend gets an annual hike between 6% to 12%
3. Your friend gets an annual hike of more than 12%
Let’s discuss these scenarios one by one.
1. If your friend has got a hike of less than 6%, probably you will say its less than the inflation (we are considering India’s inflation at 6%) and he has become poorer in real terms. Same applies for the business, if a company grows (in sales) less than 6% its growing less than inflation. In the long term if a company is growing at less than inflation rate either its not able to pass on the increased cost and its margins will decline subsequently or company’s unit sales has declined (and sales growth has come from price increase only) because it tried to increase the prices. In both the scenarios the company you have chosen would end up in trouble.
2. Your friend has got an annual hike between 6% to 12%. Your friend has successfully beaten the inflation but wait average hike of your other classmates got was 12%, so your friend has become poorer this time in relative terms. Same applies for the business if your company is growing between 6% to 12% its underperforming the Indian economy (6% inflation + 6% real growth). So, there are high chances your company would be losing the market share because its growth rate would be less than the peers. Someone may argue about growth of large cap IT companies which would be less than 12% normally and they are becoming bigger and bigger, but most of the business for those IT companies come from US or Europe where real growth and inflation combined would be equal to 5% to 8% in normal scenario (not considering the current scenario of high inflation) and this is what their(Large cap IT companies) growth rate is.
3. Now the third scenario is when your friend gets an annual hike of more than 12%, well this is a scenario where your friend needs to check the hikes of the other professionals in the same industry, he may be doing good may be not depending on the other professionals in the same industry.
Same applies for business if your company is growing more than 12% check, how the other companies in the industry are doing and how much is the growth rate of the industry. If your company is growing faster than the industry it would be gaining market share, if its growing slower than the industry it would be losing the market share.
Happy Investing :)