MBA 620 Milestone 2
Southern New Hampshire University
Dorcia Heath
April 7, 2024
TransGlobal Airlines began in 1915 and is based in Miami, FL. The company has over 40000
employees, which helps the company to run its daily operation. Company has been successful in
raising their global market share to 18% since its existence, which allows the company to be
ranked second in the global market. The airline has a presence in six continents with 242
destination and serving 52 countries. TransGlobal Airlines is in the process of expanding their
operations by acquiring other companies. This report is to give insight into the performance
evaluation of TransGlobal, Company A and Company B, the two companies that they are
planning to acquire. This report will entail the benefits of the acquisition of both companies
along with the cost and the risks.
Internal Environment
The internal environment of a company refers to the factors and conditions within the
organization that influence its operations and performance. It includes elements such as the
organization's owners, managers, leadership, employees, material resources, and organizational
culture6(Halmaghi et al., 2017). TransGlobal focus as it pertains to culture involves delivering
quality service to each customer at its highest level. The organization makes sures that all
customers are treated with the utmost respect and that all customers know that they are valued.
TransGlobal also allows employees, business partners and stakeholders to know that they are
important to the company no matter what level they are within the company.
The organization has made it their priority to enhance the travel experience of customers
by coming up with innovative ways to do so like upgrading ticketing and reservation experience
by introducing smartphone apps. The company also focuses on b building long-term
relationships with each passenger, this includes making sure that their safety is a priority. To
make sure that each passenger’s safety is prioritized all employees are provided with safety
training to help them to perform their job effectively. In addition to people, Transglobal also
takes the necessary steps to protect the planet. The organization is aiming to reach a net-zero
carbon footprint by 2075. To start the process of decreasing their carbon footprint the company
has started the adoption of fuel-efficient aircraft and, they are seeking alternation fuel options.
The company is also focused on addressing workplace inequities and building a culture of
inclusivity.
As it relates to leadership, the organization is a publicly held company with a board,
president, VP admin, CEO, CFO, COO, VP sales, division VPs, and subsidiaries. All these
leaders play an important role as it relates to making decisions within an organization. The
company is allowed to make decisions better and faster based on the systematic leadership
hierarchy that is present.
The internal processes the company has allows there to be interactions between the
customers and the airlines at the beginning of booking their reservations, then to them boarding
their flights and it ends when the customers retrieve their luggage from baggage claim. Though
TransGlobal has operations worldwide their presence in the U.S market is slightly higher than in
the global market. With the company being second in the U.S and global market TransGlobal
plans to remain a huge competitor in their industry by expanding its operations to further reach
more customers.
TransGlobal Airline has presented strong financial performance with their revenue
coming mainly from the passenger market segment. In 2017 the company had a revenue of USD
$11,635 million, which increased to $12,519 million in 2018 and in 2019 again there was an
increase to $13,313 million. Though the passenger market segment increased year-over-year
cargo and other areas of revenue were stable. Domestic revenue grew 7.7% in the last quarter on
1.6% higher passenger unit revenue (PRASM) and 6% higher capacity.
As it relates to the geographical segment, the Latin revenue grew 6.7% on a 6.3%
increase in unit revenue and 0.4% higher capacity. This revenue improvement was driven by
continued double-digit unit revenue growth in Brazil and Mexico. The income statement shows
that the company’s net income went from $1009 million in 2017 to $1501 million in 2019. With
the increase in revenue and net income it shows that though the company is expanding its
operations it is also maintaining its growth financially, which will allow the company to continue
to increase its market share.
External Environment
External environment factors are elements that exist outside of a company's internal environment
that can affect a company's operations. These outside forces can help the business or present
challenges to its current processes (Indeed Editorial Team, 2023). These factors include aspects
like competitive, market, regulatory policies, customers, suppliers, and other relevant
stakeholders.
TansGlobal Airlines will face many competitions in the international market as well as in
domestic market. The increasing number of low-cost airlines that offer airline tickets at a lower
cost can cause competition to rise within the industry. With competition rising the organization
will need to invest more in enhancing the company to retain its customers. In the market segment
TransGlobal offers different seating experience which allows them to offer services to everyone
from first class, business class, luxury, and economy. This has allowed the organization to
maintain a customer retention rate of 80%.
For TransGlobal to operate effectively in their market, there are certain regulatory
requirements that they must follow. The organization will have to follow the regulations of DOT
as well as Federal Aviation Administration (FAA) for the market in which they operate in.
TransGlobal Airlines will abide by the regulations of the international market for licensing and
other standard requirements. The upgrades that the organization needs to make in order to
maintain its standing within it market will allow for suppliers to have high power as well as high
interest to influence the operations of TransGlobal Airlines.
Balance Scorecard Analysis Company A
Company A is the first of the two companies TransGlobal Airlines wants to acquire. The
company is based in Miami Fl, their offered market segment is for luxury tourists and business
class carrying about twenty to sixty passengers. Based on the evaluation of this company’s
financial performance it shows that the company has a positive cashflow which puts them in a
great place for advancement. One of the best ways to analyze whether this company is a good
candidate for the acquisition is to perform a cost-benefit analysis. For this analysis we will use
the opportunity cost and the risk. These will allow us to gain better knowledge of the risks and
benefits of acquiring company A.
Opportunity Cost
Opportunity cost represents the potential benefits that a business, an investor, or an individual
consumer misses out on when choosing one alternative over another (Fernando, 2023). The
strategic objectives for Company A are to increase revenue, COGS reduction, employee
turnover reduction and to increase market share. These will allow the organization to track their
revenue to make sure they are on track for growth.
The internal processes on the scorecard for Company A include upgrading the
company’s check-in and ticket purchasing process by integrating a new app and reducing the
on-ground aircraft turnaround time for the company. Though these two goals seem to be in two
different areas as it pertains to the opportunity cost. The integration of the new app can help
with bringing more revenue to the company by making it easier for customers to book their
reservations. Reducing the aircraft turnaround time will most definitely cost the company more,
but the focus of this goal is to improve the current systems for aircraft departures by being more
efficient. This will also help by improving the employees’ effectiveness in how they perform
their boarding procedures, which can be cost effective. With TransGlobal Airlines already
having a mobile app that their customers utilize it could be upgraded to accommodate the use of
Company A’s customers, which will reduce the cost which will help the company to save more.
This would be medium risk for TransGlobal Airlines.
The customer/market strategic objectives that are being focused on Company A is to
increase customer retention and increase new customer growth. The plan is to focus on a
customer satisfaction survey which will allow TransGlobal to be able to implement better ways
of keeping their customers happy. They can also improve their public image and branding by
creating surveys that customers will take to monitor how to better improve. This is ultimately
the best way to maintain a low opportunity cost because a retention team could be put in place
to do so. This is low risk to TransGlobal Airlines because they already have plans to implement
such a system for the company.
The learning and growth strategic objectives are to reduce the employee turnover rate
and to increase employee engagement. Providing training and developmental opportunities for
employees to grow their knowledge and expertise, offering rewards and recognition programs,
and conducting additional employee surveys to find ways to improve workplace culture is the
opportunity cost for this segment. This will be worth it in the long-term as employees will feel
valued and want to remain with the company. This is low risk for TransGlobal Airlines as they
already have thousands of employees. Company A will need to give additional training to their
employees which will allow for a smooth transition after the acquisition.
Balance Scorecard Analysis of Company B
Company B is the second of the two companies TransGlobal Airlines wants to acquire. The
company is based in Orlando Fl, their offered market segment is for tourists and business class
carrying about twelve to fifty passengers. The financial strategic objectives for Company B
include increasing revenue growth and reducing the cost of goods sold. The company annual
revenue sits about $26-27 million, and its COGS keeps increasing yearly. The increasing COGS
can be a high risk for TransGlobal Airlines because costs will continue to rise. Company B will
need a new aircraft because of the age of their current aircraft and to mitigate this cost they will
need to increase ticket pricing.
The internal processes on the scorecard for Company B include the cleanliness of the
aircraft and their food and beverage service. These two goals fall under the same category as
they fall under customer satisfaction rate. Customers have complained about their satisfaction of
the presence of the aircraft and what they are served on the aircraft for the duration of their
flight. To improve customer satisfaction Company B will need to get better cleaners or invest in
better cleaning products and they will need to offer better food and beverage services. This can
be a huge risk factor for TransGlobal Airlines as they currently do not have this problem with
what they offer their customers on their flight, and they have not had complaints about the
aircraft cleanliness. This will cause TransGlobal to acquire a cost that might cost them.
The customer/market strategic objectives that are being focused on Company B are to
increase customer retention and increase customer satisfaction. With a retention rate of 40% for
repeat this shows that the customers are not happy with the services that Company B are
providing. Company B will need to implement strategies that will help to boost customer
satisfaction like offering free in-flight entertainment and Wi-Fi, offering rewards for frequent
flyers, and incentive programs to retain customers. The is a medium risk for TransGlobal as it
can be worked into their current strategy. It will be only costly to implement things that’s they
do not currently offer.
The learning and growth strategic objectives are to reduce the employee turnover rate
and to increase personal training and development. Being that Company B has a higher
employee turnover rate than most company in the industry. They will need to offer training that
would improve the employees’ expertise that would add value to employees, and the company.
Implementing reward and recognition programs and offering extra informative programs. This
is low risk for TransGlobal Airlines as they already have thousands of employees, and these
strategies should already be implemented in TransGlobal. Company B will need to give
additional training to their employees which will allow for a smooth transition after the
acquisition.
Though both Company A and Company B have strategies that need to be improved upon
based on the analysis I recommend that TransGlobal Airlines acquire Company A. The
acquisition will allow TransGlobal to expand their operations with more benefits. It will also
help with the growth of the company’s revenue.
Reference
Halmaghi, E.-E., Iancu, D., & Băcilă, M.-cashflow.). The Organization’s Internal Environment
and Its Importance in the Organization’s Development. International Conference
KNOWLEDGE-BASED ORGANIZATION, 23(1), 378–381.
Indeed Editorial Team. (2023, March 29). 9 external environment factors that affect business.
Indeed Career Guide.
https://www.indeed.com/career-advice/career-development/external-environment-factors
Fernando, J. (2023, March 17). Opportunity Cost: Definition, Calculation Formula, and
Examples. Investopedia; Investopedia.
https://www.investopedia.com/terms/o/opportunitycost.asp
