Question
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AcquisitionProposal.pptxAcquisition Proposal
Student’s Name
Institutional Affiliation
Course
Date
Agenda
Overview
Situation Analysis of TransGlobal
Acquisition Rationale
Proposed Acquisitions
Analysis
Analysis of Company A
Analysis of Company B
Proposal
Recommendation
Rationale
Assumptions
Situation Analysis: Internal Environment
TransGlobal Airlines was formed in 1951 and is headquartered in Miami, Florida. About 40,000 people presently work for TransGlobal.
Culture - TransGlobal has updated their principles to include: -
Customers will always be treated with respect by us.
We place a high priority on our people and our business relationships.
We are always looking for new ways to give our clients with the best possible travel experience.
You may expect us to create long-term ties with your business..
Leadership – made up of board of directors, president, vice presidents (VPs), CEO (CFO), COO (COO), and CFO Recently, these executives endorsed the 2030 Vision, which aims to lead the industry in three areas: safety, excitement, and environmental responsibility.
Human Resources – It is TransGlobal's goal to improve the working conditions of its workers and to help them become more successful.
Financial – TransGlobal has an annual gross revenue of $20.683 billion and annual net income of $2.099 billion.
Situation Analysis: Internal Environment
TransGlobal Airlines provides service to more than 240 locations in 52 countries. Their major market is composed of first class, business class, and economy class.
Competition - American Airlines is TransGlobal's worldwide opponent, whereas Southwest is their main rival in the United States.
Market - TransGlobal has the second greatest market share in both the United States and internationally. It presently has an 18 percent market share.
Before the Covid-19 epidemic, there was an 80% retention rate of returning consumers and a 27% rise in new customers yearly.
Additionally, 88 additional aircraft were added to the company's fleet last year, bringing the total to 1,062.
Acquisition Rationale
TransGlobal intends to increase the number of destinations available to consumers.
TransGlobal intends to increase the number of fleets with less than 70 seats.
TransGlobal intends to increase fuel economy measures and achieve a carbon footprint of zero by 2075.
Proposed Acquisitions
Company A
Location: Miami, Fl
Size: 165 employees
Age of Firm: 41
Customer segment: Vacationers, tourists, Caribbean Business & Government Clients
Target Market: Luxury Tourist & Business Class
Major Competitors: Delta Connection, American Eagle, Bahamas Charter Airlines, Cape Air & Seaborne Airlines
Company Leadership: Privately held, with a board, president, VP admin, CFO, COO, VP sales
Current Financial Status: Annual Revenue $28-29 million, Gross Profit Margin 64%
Current Market Status: 15 destinations, 4th in Caribbean market share, 66% return customers, seat occupancy around 74%
Company B
Location: Orlando, Fl
Size: 88 employees
Age: 34
Customer Segment: Vacationers, tourists, business travelers
Target Market: Tourists & Business
Major Competitors: Delta Connection, American Eagle, Sun Country, & Frontier
Company Leadership: Privately held, with a board, president, VP admin, CFO, COO, VP Sales
Current Financial Status: Annual Revenue $11-13 million, Gross Profit Margin 49%
Current Market Status: 8 destinations, 40% repeat customers, seat occupancy around 62%
Analysis of Company A
Balanced Scorecard Analysis: Company A
Opportunity:
Company A has a gross profit margin of 45% and a net profit margin of 8%.
It has regularly increased its sales from $27,981 in 2017 to $29,610 in 2019 at an annual growth rate of 2.5% to 2.9%.
The company's revenue has climbed consistently from $28 million to $30 million, and this trend is anticipated to continue over the next three years.
Risk:
Medium risk is posed.
If financial projections fall short, the transaction becomes less advantageous.
Another concern is the dependency of Company A on the luxury class.
Analysis of Company B
| Category | Strategic objectives | Key performance | Kpi Target | Students KPI Selection Rationale | |||
| Year 1 | Year 2 | Year 3 | Selection Rationale | Cause-Effect Relationship | |||
| Financial | Increase Revenue | Net Profit | 8% | 10% | 15% | Monitoring net profit is essential since it determines a company's viability. Profit growth will permit more investment in new assets and business enhancement. | Newer aircraft would minimize the amount of time and money needed on maintenance, enabling consumers to fly more often and spend more on trips. |
| Reduce cost of goods | Costs of goods sold | ||||||
| Internal Process | Increase cleanliness protocol | Customer satisfaction rate | I picked customer satisfaction rate as the key performance indicator (KPI) for these goals because it is essential that we identify areas for improvement. If it does not help or retain consumers, it is our responsibility to determine what would. | Increasing customer happiness and enhancing these simple things, such as refreshments and cleanliness, might make the on-board experience considerably safer and more pleasant for consumers. Customers like feeling cared for, and if we continue to give these services, they are more likely to return. | |||
| Improve Drink and Food services | Customer satisfaction rate | ||||||
| Increase customer satisfaction | Net promoter score | 5 | 6 | 7 | |||
| Customer Market | Increase customer retention | Customer retention rate | 40% | 50% | 60% | The logic for these KPIs is that customers are the lifeblood of our company. We try to avoid dissatisfied clients as much as possible in order to preserve our reputation. | By offering additional in-flight amenities, we may make lengthier trips more pleasant for passengers. Customers who are satisfied will improve our reputation by sharing their positive experiences with others, so advancing our company. |
| Learning and Growth | Increase personal development training | Courses and trainings offered, employee attendance | A high turnover rate may be detrimental to the company's time and resources. By offering career advancement opportunities, individuals may increase their talents and grow together with the organization | Making workers feel valued and appreciated will increase their loyalty and their output. Additionally, satisfied staff lead to satisfied consumers | |||
| Reduce employee turnover | 15% | 12% | 9% |
Balanced Scorecard Analysis: Company B
Opportunity:
The gross profit margin of Company B is 33%, whereas its net profit margin is 0.2%.
Annual sales are $26-$27 million.
Risk:
The risk connected with Company B is substantial.
Company B's profitability seems less promising than that of Company A.
The customer retention rate is poor, and the yearly staff turnover rate is 18%.
Recent findings also indicate that Company B had two planes grounded leading to 10% drop in revenue.
Recommendation
TransGlobal should acquire Company A only
Rationale
Financial Rational
Annual Revenue $28-$29 million
Net profit margin is 8% and gross profit margin is 45% Competitive
Rationale
Goal to improve fuel efficiency
Improving brand to attract newer customers Market Rational
15 destinations
62% customer retention rate
New customer growth of 22% annually
Cultural Rationale
Leadership focused on revenue growth and customer satisfaction
Assumptions
Worst Case Scenario
No further flights will be added to Company A's destinations
The company's market share in the Caribbean will continue to erode
Strategic goals will not be met.
Best Case Scenario
Additional locations beyond the original 15
Increase in market share relative to the competition
All balanced scorecard strategy goals accomplished or surpassed.
