Analyzing competition is one of the key aspects of running a business. In this article, learn how to use Excel’s scatter plots to understand competition.
Recently, Kaiser at Junk Charts pointed to a very effective business chart that shows the dynamics of competitive land scape with ease.
The chart shown aside originally appeared in Asymco, shows how mobile handset market has changed between 2007 & 2010.
What is so special about this chart?
I like this type of chart because it clearly tells the story of what happened in mobile handset market between 2007 and 2010. It shows how then leader, Nokia, kept loosing profit share despite a tiny loss in market share. It shows how new entrants like Apple have eroded the profit share for others. [related: good charts tell stories]
The chart instantly lets me ask important questions like, “So what did Nokia do wrong?”, “How come RIM is also in the same league as Apple (ie both market share and profit share went up) ?” etc. and explore for answers.
And that is what a chart should do. It should present a story and poke our curiosity to ask questions (or address problems).
How to construct similar chart in Excel?
Here is how you can construct similar business chart in excel.
Step 1: Get your data
In case of analytical charts like this, getting correct data is all important. For the sake of example, we will use the same variables – Market Share & Profit Share for 4 fictitious products – A,B,C & D. The data is shown below:
Step 2: Re-arrange the data, so we get first and last values
This is very simple. Use cell references to extract the data for just first and last periods. Now make starting values as zero and calculate ending values. Something like this:
Step 3: Make a scatter plot
Select the data and make a scatter plot. When you are done, it should look something like this:
Step 4: Format the chart
Do the following to format the chart:
- Add lines to scatter plot so that starting and end point are connected
- Set arrow symbol as the end-point style for these lines (new feature in Excel 2007 and above)
- Remove grid lines and legend
- Add data labels to either starting or end points alone.
- Add axis labels, position them accordingly
- Make axis and labels subtle.
- Add a descriptive chart title
And you are done. The chart should look something like this:
Bonus Step: Making a scatter plot of absolute values
As you can see, the above chart only shows changes in market share and profit share of products between Q1-2008 and Q2-2010. But a more descriptive option would be to show absolute position of each product at both times.
Like this:
To make this chart, all the steps are same as above, just change your data to starting and end points, not the calculated ones.
Download Competition Analysis Chart Templates:
I have prepared a simple excel chart template to help you create similar charts on your own. Click below links to download.
You can see the chart construction steps in the downloaded workbook.
What do you think about this chart?
As I mentioned I really liked how this chart lays out the dynamics of market place without complicating or animating anything. I think it is both simple and elegant [related: keep your charts simple]
What do you think? Please share your opinion and ideas thru comments. Also, tell us how you would have plotted same data?
More Excel Charts for Analysis:
Excel charts are powerful visual tools for analysis and exploration. We have posted several useful chart templates & ideas on chandoo.org. Please visit these pages for more resources on charting & analytics.
62 Responses to “Introduction to Financial Modeling using Excel [Part 1 of 6]”
Oooh! Chandoo - are you looking to outperform the Altman Z-Score?
I'm all ears 😉
Many thanks, Paramdeep. Looking forward to the remaining parts of the series
Thank you Paramdeep. I look forward to following the series.
Those interested in Financial Modelling may also find this site interesting:
http://www.fimodo.com/
Hi Chandoo,
Really looking forward for this awesome financial modeling journey 🙂
All the very best..
Regards
Rohit1409
Hi Chandoo,
it seems the future is not away when we will have a new software/spreadsheet as competitor to Microsoft Office/Linux etc.......Hats Off to you..
KEEP SMILING
GURU
@apex, clarity: Thanks...
@all: I do hope that you have started creating the model for the simple case given.. Lets see, what according to you all is the best way forward. So your views on the best practices for the template for valuation?
The planning process varies depending on the project and type of data I am looking at.
If I am doing a cost impact study based on actuals, verses a cost impact study to estimate future cost, verses reviewing historical data then creating a model, verse having to review historical data, apply it to a draft model, update the model based on the draft outputs and the presentation then sometimes repeat the process a few times.
Revisions are an absolutely necessary part of corporate financial modeling especially for the presentation sections. A good presentation will be revised multiple time. There are just to many elements which cannot be planned for, especially with ad hoc reports/models.
Revisions are leading cause of errors, and time spent tracking down errors. The more complex the model the more important revision control is. I would be interested in a section on revision control and good methodologies to determine the effect of changes on models. That is without having to due detail review of the whole model over again.
Hi Paramdeep,
I can't wait for the continuation of this series. You have done a great job in making technical terms appear simple and easy to understand. This article is also very useful in our line of business, in fact i will be featuring this article in our site. Of course the credits will go out to you.
Many thanks and keep it up!
Drew
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@Drew: Thanks! Hope that you found the tutorials useful. Feel free to get back with any queries.
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Great information, i also want to learn financial modeling, how to learn
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chando bhai i m tired for looking financial modeling detail but i cant find it anyway. so plz kindly send me full detail of financial modeling from beginning levelo to final. where i learn complete modeling procedure n order to become professional
You noob, you won`t become a professional like that, you need to do it on your own and learn as you go
@Nadeem Bhai,
The 6 links to the tutorial at the top of this post, build a small integrated financial model step by step. We are also running a complete 8 weeks course on financial modeling (similar to excel school). But that is almost 50% complete right now. If you want to join, you can join the next batch (probably starting in Jan/ Feb)
Feel free to get back, if you have any queries regarding the model/ steps in creating the same
[...] you do not wish to join our course, we are still cool. Here is a 6 part training on financial modeling & 2 part training on project finance. They are free, fresh and [...]
I want to learn how to build a financial model
Dear Lulama,
You can use this tutorial to learn to build a financial model. We also run a course on financial modeling and project finance modeling. The details can be obtained from:
http://chandoo.org/wp/financial-modeling/
You can consider joining that as well.
I would strongly encourage you to join the newsletter to get the updates about financial modeling and the next batch starting for the course.
I want to learn thorough excel and financial modelling thing !!! I am a chartered accountant..CAn you please suggest a detail syllabus that should be learn by me. Also suggest any classes that would cover everything in excel and financial modelling related things.. I stay in mumbai, so please suggest a class in mumbai or any books..byyee.. thanks ..
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Hi Vivek,
We do conduct the financial modeling course online as well as in Mumbai. We start with the basics of excel and build a completely integrated financial model in the class. For details you can look at:
http://chandoo.org/wp/financial-modeling/
or
http://www.edupristine.com/courses/financial-modeling/prisitne-fm-offering
Please describe to me various type of financial modela and demonstrate how a model can be build.
Regards,
Dear Immanuel,
This series of articles does exactly that. If you go step by step through the articles and create the excel sheets on your own, you will understand how to create an integrated financial model.
Alternatively, if you are looking for video sessions, you can consider joining our course:
http://chandoo.org/wp/financial-modeling/
It is expected to reopen somewhere in mid july.
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Thanks Paramdeep this is great!
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Paramdeep Hi! A bit ignorant here, but let's ask anyway. Can I access "recorded" video sessions apart from following the step by step articles?
Thanks!
@Marius: Yes, we do have a training program with recorded video sessions. If you are interested, you can enroll for the same. The details can be obtained from: http://chandoo.org/wp/financial-modeling/
i want to know about the scope of financial modeling.i also want to know after doing financial modeling course what are the job prospect, like where i can found job so plz send me full detail of financial modeling from beginning levelo to final.
I am interested to join your Financial modelling class cos am involved in a new business. But I have a Macbook Air with Excel for Mac installed. Would that work with your program?
Dear Charsiew,
The complete training program is built using Excel 2007 with MS windows. Though there is nothing specific to Microsoft in the training. I think a few people have joined the program and are using MAC. If you write an email to me on paramdeep @ gmail.com, I can send you the email ids of those participants and you can get to know their feedback and difficulties in using the program.
This is great, when does the next batch start?
Dear Karan,
The course is in recorded format and you can register for the same as soon as you want.
Paramdeep, thanks. I'm venturing into financial modelling for the first time and from the little I've read from your website already, I'm sure I'll find your resources very useful; thanks once again.
Dear Seun,
I am glad that you are finding the resources to be useful. Feel free to send in comments with your feedback and further questions.
hie ppl...I jst wantd a small favour cn smone help me out in calculating EBITDA, along with its working, from wipros annual report 2011-2012, link - http://www.wipro.com/investors/annual-reports.aspx
...PLZ plz... i am having a submission tommorow.
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Nice article.
In designing Excel Financial Models I design the user interface as friendly as possible and structuring the input variables in the workflow of the client's operations so that they can flow through the impact of the input variables in Excel using buttons and macros and giving the model transparency.
Cheers
Arthur
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Another step to build any financial model is to do a financial analysis beforehand. This normally helps to design and come up with good projections.
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