MBA 620 – Executive Summary

Scenario

You have almost completed your analysis of Companies A and B and are scheduled to deliver your proposal to the board. While researching to ensure accurate and up-to-date data, you learn that two of Company B’s aircraft have been grounded over the past couple of months due to technical issues, one of which could have been an FAA safety violation.

The subsequent investigations, technical repairs, and grounded flights have led to a 10% drop in their revenue over the last month. Mitigation expenses have added about $80,000 to their operating costs. Company B has also suffered negative customer feedback due to some of the ground crew’s mishandling of the situation.

In this assignment, you will write an executive summary to capture the situation and share your analysis and perspective on how these safety issues might affect your acquisition recommendation.

Prompt

Write an executive summary describing the newly discovered concerns and your analysis of the situation at Company B.

Specifically, you must address the following rubric criteria:

Summarize the safety issues and their direct impact on the company over the past month.

Describe how this news affects factors other than revenue, which will then affect the company’s value.

• How does this affect your initial performance evaluation and analysis of the company?

Do you see any additional risks? Explain.

• Will it impact your recommendation about acquisition? Why or why not?

What additional information about this situation will you need to make your final decision?

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Analysis of TransGlobal Airlines, Company A, and Company B
Courtney Roberts
September 8, 2024
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Analysis of TransGlobal Airlines, Company A, and Company B
Situation Analysis of TransGlobal Airlines
Internal environment
The culture of TransGlobal Airlines is well established despite their rules dictating to be
stringent and less flexible. The parent company has a healthy work culture, which is essential for
the prosperity and success of the Airline. Through the TransGlobal 2030 vision, culture
prioritizes employee satisfaction, fosters a supportive environment, and offers developmental
opportunities. Moreover, the culture sees employees and people as they are, human. They are all
treated with accordance and respect. By implication, the culture significantly reduces turnover,
boosts productivity, and achieves airline business goals (Sese, 2023).
The leadership of TransGlobal Airlines is publicly held by a board, president, VP admin,
CFO, COO, CEO, VP sales, division VPs, and subsidiaries. They are very experienced,
collaborative, and inspiring leaders. Leaders are very focused on providing structure for work,
managing employees, and keeping them on track to achieve goals. They have a good track record
of visionary thinking, inspiring long-term commitment, and creating meaningful and purposeful
work for the companies.
The internal process of the Airline is consistent and very efficient. There has been more
excellent internal communication, financial management, employee onboarding, and inventory
management. In addition, the internal process is part of the metric and balanced scorecard to
evaluate the company’s performance. However, the internal process infrastructure needs to be
improved for the company’s acquisition.
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In terms of human resources, the company has forty thousand employees. It began
operations in 1951, and its headquarters are in Miami, Florida, USA. The Airline is very
committed to fair and equal treatment of all the employees. It abides by the respective
employment laws of all the fifty-two countries it operates. The Airline has a highly skilled
workforce. Also, the Airline has a training program that provides employees with the basics
before they begin to work. The company is well known for its loving culture and commitment to
customer service. It is the best regarding employee satisfaction, has better wages, and offers
generous benefits that help maintain its long-term relationship with the employees.
Furthermore, TransGlobal Airline operations are very effective and efficient, helping the
company to gain efficiency and reduce costs. It operates globally, has two hundred and forty-two
destinations that serve fifty-two countries across continents, and provides different market
segments for its customers. Additionally, the operations are sound, with better operations control,
ground-to-air communications, weather data provision, and flight planning. However, there have
been operational flaws such as coordination with stakeholders, maintaining operational
efficiency, and managing a large number of passengers.
After a complete evaluation, TransGlobal Airlines has a thriving and well-grounded
financial performance. Its standing assets, liabilities, and stakeholder’s equity have thrived. The
return on investment, current ratio, cash flow, and debt to capital have undergone proliferation.
Over the years, the profit and revenues have increased immensely. The current financials show
annual gross revenues at 20.683 billion dollars and an annual net income of 2.099 billion. The
earnings have shown adjustments of a twenty-eight percent increase every year. Corporate
revenue grew by six percent, and domestic product revenue grew by seven percent, driven by
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leisure demand and strength in business during the holiday period. Additionally, the TransGlobal
SES principles and goals led to an increase in customers and revenues.
External environment
TransGlobal Airlines has been very competitive globally. The major competitors are all
international and domestic US airlines. The competition has declined all the monopolistic status.
As a result, competition has made airlines offer high-quality services. The services include
market segments that provide customers with different classes, such as first class, luxury,
business class, and economy. The classes are based on financial class, status, customer
preferences, and ticket availability. They have also adjusted airfare according to the competition
situation.
Additionally, TransGlobal Airlines has thrived well in the market. The target market is
mainly global, serving many destinations. Its global market share is eighteen percent, ranked
second. It has more excellent customer retention. Eighty percent of the customers return. The
parent company also has a good record of customer growth; new customer growth is at twentyseven percent annually. However, the company has experienced several setbacks, such as global
passenger congestion, fuel cost uncertainty, international conflicts, and pandemic aftermaths,
which need to be addressed for the acquisition.
Furthermore, TransGlobal Airlines adheres to the regulations of different countries. They
have worked tirelessly to expand the use of carbon offset measures, and they have a vision to
reach a net zero carbon footprint by the year two thousand seventy-five. They have also
improved airline safety ratings from five to seven stars. Additionally, they have trained all their
employees in the basics of the Federal Aviation Administration’s (FAA’s) Safety Assurance
System(SAS). By implication, employees spot risks and prevent accidents.
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In addition, TransGlobal Airlines has a very well-conditioned customer environment. The
customers are treated with respect and provided with the best flight experience. The Airline is
connected with building long-term relationships with its customers. They have built customer
loyalty, brand awareness, and an inclusive culture. Customers are provided with different classes
favoring their preferences. Moreover, they have upgraded the reservation and ticketing
experience for their customers. It includes a smartphone app, ground transportation, and an
integration app associated with lodgings.
TransGlobal Airlines has a good relationship with its suppliers and stakeholders. The
suppliers include ground handling agencies, financial institutions, cargo handling agents, and air
navigation service providers. Stakeholders include aircraft manufacturers, fuel providers,
maintenance contractors, joint ventures, and passengers. Their objection is to put the customer
first and improve the operation and the management of the Airline.
Balanced scorecard analysis of Company A
Company A has performed well financially, with notable profits and revenues. The net
profit margin and annual revenue growth have increased by a certain percentage. This resulted in
the introduction of measures crucial in cost management, route optimization, and waste
reduction. However, the company only achieved the net profit margin objective, which grew
from the current eight to the objected eleven percent in three years. The total revenue grew by
seven percent, which was three percent away from the objected one. Company A internal process
was average. The process was to assess the customer satisfaction index and utilization rate. The
aim was to improve customer satisfaction rate and capacity utilization to ninety-nine and ninetyseven percent, respectively, in three years. The objective was achieved in three years. The
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programs, such as personalizing flight services, ensuring efficient booking, and improving safety
and cleanliness, resulted in the achievements.
Company A objectives for customer retention rate and acquisition costs were achieved.
The company aimed to increase the retention rate to over ninety percent and reduce acquisition
costs by five percent. The programs deployed were improvements in the quality of services and
marketing campaigns. It helped increase customer loyalty. Company A done poorly on learning
and growth. The company was not committed to improving employee retention and technology
utilization. It failed to achieve its retention and technology utilization to over ninety and a
hundred percent, respectively, in three years.
The opportunity cost to acquire company A is comparative, making it cheaper and more
affordable. It has achieved reasonable profits and revenues in the three years. However, the
company underperformed in some areas. It failed to retain its employees and employ technology.
This would provide a more significant challenge in the acquisition of the company. The company
will incur the cost of creating the infrastructure that will eliminate all the loopholes. The
acquisition will have benefits such as customer retention and satisfaction. It will benefit from
customer acquisition costs. The company had performed well in those areas.
The market, financial, cultural, and operational environment risks to the parent company
will accompany the acquisitions. Market risk will be medium since the company has built better
customer loyalty and the customer return rate is very high. Financial risk will be medium since
the objected annual revenues were underachieved. Also, there will be a cost of training and
employing new workers since the company has low employee retention. Company A can also
employ workers from the parent company. Cultural risk will be low due to the close long-term
relationship between the company and its customers. Company A retained its customers.
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Operation risk will be high since the company has underachieved in the operation process. It will
end up looking for alternatives, perhaps from the parent company.
Balanced scorecard analysis of Company B
Company B performed well financially, having achieved all its financial objectives. The
net profit margin grew by two percent every year. ROI was improved by one point five percent
every year. The company’s programs, such as route optimization, aggressive marketing, and
modernization of the fleet, resulted in good financial performance. The programs were well
budgeted to reduce the cost. On customers and market, company B achieved all objectives. The
churn rate was reduced to one percent, and brand awareness was increased by thirty percent.
Surveys were used to gather customer’s views and perceptions. Company B’s internal process
was moderately efficient. Cost per customer was reduced by five percent every year, and process
efficiency was to be improved by over ninety-five, but ninety percent was achieved. The
company matched demand with the internal capacity, thus achieving a lot. Learning and growth
were highly achieved. The employee turnover was reduced to ten percent, and training and
development participation was improved by forty percent in three years. The company had a
better understanding of trends from the employee data analysis, which impacted them and
improved their employee job satisfaction a lot.
The acquisition of company B will be very high due to its proliferation in all areas. The
cost will be high since the company has retained and trained all their employees, retained their
customers, and built loyalty with them. Additionally, the company has a well-functioning
internal process, and the company has high profits and revenues. The acquisition of company B
will have the benefits of continuing with a qualified and skilled workforce, creating profits, and
having a high customer return rate. This will reduce all the costs.
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The acquisition of company B will have lower risks in the market, financial, culture, and
operational environments in the parent company. The market risk will be low due to the
reduction in the customer turnover rate. The company will retain its customers by reducing the
turnover rate. Financial risk will be low because the company is already making better profits
and revenue annually. It will not affect the other company financially. The company had a better
relationship with the customers, making the culture risk low. Operational risk will be low since
the company has a good track record in its operation process. The company will operate on its
own without requiring any endorsement or benefits from the parent company.
My recommendation is to acquire company B. This is because company B has a higher
chance of making a higher profit right after the acquisition. There is no cost of reorganizing,
restructuring, training employees, and creating a better infrastructure. The company is well-run
compared to company A, reducing operation costs.
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Reference
Sese, L. (2023). Next Generation Aviation Professionals Contribution to the Safety Culture of
Selected Local Airlines. Available at SSRN 4554895.
https://dx.doi.org/10.2139/ssrn.4554895