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6-1 Milestone Two: Performance Analysis
MBA 620
Feb 12,2022
TransGlobal Airlines is a reputed government-owned company. The company has
enjoyed a monopoly status in the airlines industry. TransGlobal Airlines is planning to
expand its operations and acquire other companies. This report focuses on shedding light and
evaluating the performances of TransGlobal Airlines, Company A, and Company B that are
involved in the acquisition process. The report will also compare the benefits, costs, as well
as risks associated with each of the companies in order to make well-informed decisions
relating to the acquisition.
A. Situation Analysis of TransGlobal Airlines
TransGlobal Airlines started its operations in the year 1951 and has expanded a lot.
Today, the company has nearly 40,000 employees. It is a global airliner with a dominant
presence in the US market. The headquarter of TransGlobal Airlines is in Miami, FL.
a) Internal Environment
The internal environment of an organization comprises of the culture of the
organization and other elements within the organization. It includes the owners, managers,
employees, leadership, as well as material resources (Halmaghi et al., 2017).
Organizational culture refers to the norms, values, beliefs, assumptions, and attitudes
that play an important role in shaping the manner in which people within an organization
behave or get things done (Politeknik NSC surabaya: Business Administration. Politeknik
NSC Surabaya | Business Administration, 2021). In terms of culture, TransGlobal Airlines
focuses on ensuring the delivery of optimum quality services to its customers. The company
treats all its customers with respect and values the customers, employees, business partners,
as well as other important stakeholders. TransGlobal Airlines delivers innovative solutions to
enhance the travel experience of the customers. It focuses on building long-term relationships
with the customers. The company also prioritizes the safety of the customers. For this reason,
the employees are provided with appropriate safety training. In addition to people,
TransGlobal Airlines also takes the necessary steps and operates in such a way so as to
protect the planet. The company aims at reaching a net-zero carbon footprint by the year
2075. It has started adopting alternative fuels and fuel-efficient aircraft in order to lower the
carbon emission into the atmosphere. Moreover, TransGlobal also plans to enhance its
ticketing and reservation experience through the introduction of smartphone apps. The
company also focuses on building an inclusive culture and effectively addressing all the
inequities existing in the organization.
In terms of leadership, TransGlobal Airlines is a publicly held company with a president,
board, VP admin, VP sales, CEO, COO, CFO, division VPs, and subsidiaries. All these
individuals play a vital role in making important decisions relating to the operations of the
company. The leadership hierarchy of the company allows it to make a better and faster
decision in a systematic manner.
In terms of internal processes, the interaction between the airlines and the travelers
starts with booking or making flight reservations and ends with passengers boarding the flight
and claiming their baggage. In terms of operations, TransGlobal Airlines operates worldwide.
However, it has a strong presence in the US market. The global market share of the company
is 18%. The US market share of TransGlobal Airlines is 18.3%. The company is a major
airline competitor in the world and is planning to expand its operations beyond the domestic
market and enhance its competitiveness.
In terms of finance, the records of the company show that it has a strong financial
performance. The main source of revenue for TransGlobal Airlines is the passenger market
segment. The revenue of the passenger market segment was USD 11,635 million in the year
2017. However, it has increased to USD 13,313 million in the year 2019. The revenue
generated from the cargo market segment has also increased over the years. In the last
quarter, the domestic revenue experienced significant growth of nearly 7.7%. In terms of
geographical segment, the Latin market segment witnessed the highest growth of 6.7%. The
net income of TransGlobal Airlines has increased from USD 1,009 million in 2017 to USD
1,501 million in 2019. The total revenue has also increased from USD 12,954 million in 2017
to USD 14,803 million in 2019. All these financial parameters show that the company is
improving in terms of its financial abilities. Leveraging global destinations can further
increase the chances of growth and expansion of TransGlobal Airlines in the near future. It
will allow the company to enhance its market share effectively.
b) External Environment
External environment refers to the factors and forces that are beyond the control of the
organization but affect the operations of the business (Akpoviroro & Owotutu, 2018). Some
of the vital aspects of the external environment are the competition in the market, suppliers,
customers, and regulatory policies.
For TransGlobal Airlines, there exists tough competition in the international market.
The major competitors of the company are all domestic as well as international US airlines.
The increase in the number of low-cost airlines that offer reservations at competitive prices is
likely to intensify the competition in the market. In order to increase its competitiveness,
TransGlobal Airlines will have to invest more in making the necessary improvements.
In terms of market segment, the market of TransGlobal Airlines is divided into first-
class, business class, luxury, and economy. The company has a customer retention rate of
There are a number of regulatory requirements that TransGlobal Airlines have to adhere to in
order to operate smoothly in the market. TransGlobal Airlines has to comply with the
Department of Transportation (DOT) as well as Federal Aviation Administration (FAA)
regulations in the home market. Moreover, the company also has to comply with various
other regulations in the international market. TransGlobal Airlines also complies with
licensing as well as standard requirements. However, there may be a need to upgrade its
processes in order to meet the changing regulatory requirements.
The company has a very good relationship with its valuable customers. One of the
core values of the company is to treat its customers with respect and deliver exceptional
services to enhance their overall travel experience. The customers have high power and low
interest in influencing the operations of the company. On the other hand, the suppliers have
high power as well as high interest to influence the operations of TransGlobal Airlines. Fuel
companies and online travel agencies are the major suppliers of the company.
B. Balanced Scorecard Analysis of Company A
On the basis of the balanced scorecard, a number of aspects relating to the
performance of Company A have been identified. The annual growth of the company ranges
from 2.5% to 2.9%. In Year 1, the annual revenue of Company A was USD 28 million.
However, in Year 3, the revenue has increased to USD 84 million. This shows that the
financial performance of the company is improving, and the company is making efforts in
order to enhance its overall revenues. Increasing fuel efficiency will allow the company to
experience even better growth and improvement of its revenue.
Company A is focusing on expanding the number of aircraft in its fleet. This shows
that there is an increase in demand for Company A among the customers in the market. The
company plans to add two new models every year. The average age of the aircraft was 14
years in Year 1. However, it became 20 years in Year 3. This means that the company is
making an effort to make the best possible utilization of the available capabilities.
The current customer retention rate of Company A is 66%. It is lower than that of
TransGlobal Airlines, which is 80%. However, the current retention rate of the company
shows that the company has been successful in establishing a loyal customer base who are
likely to choose the company whenever they have any travel plans. This can prove to be
beneficial for TransGlobal Airlines and help in expanding its customer base.
a. Opportunity Cost
Opportunity cost can be defined as the value that an organization has to pay in order
to avail of a particular opportunity (King, 2009). In this case, if TransGlobal Airlines moves
ahead to avail the opportunity of acquiring Company A and availing the associated benefits,
it will have to bear some significant costs. One of the opportunity costs is the need to spend
on employee training in order to reduce the employee turnover rate. TransGlobal Airlines will
have to bear expenses and provide training to employees of Company A on various aspects
such as customer service, FAA basics, as well as FAA safety assurance system. However,
after the employees are trained, it can help in boosting their morale and efficiency, thereby
enhancing the overall performance of the company. So, the benefits outweigh the cost.
Another potential cost is that the parent company may have to invest more in digitalization
and integration of the latest technologies in order to strengthen the internal processes of
Company A.
b. Risks
In addition to opportunity cost, there are also certain risks associated with the
acquisition of Company A by TransGlobal Airlines. One of the significant risks is the
difference in culture. As TransGlobal Airlines and Company A have a different
organizational culture, it may give rise to certain challenges in integrating the culture. The
operational risk is low as both the companies operate in the aviation industry and serve global
clients. The financial and market risk is medium. The overall risk of acquiring Company A
ranges from medium to low.
C. Balanced Scorecard Analysis of Company B
On the basis of the balanced scorecard of Company B, a number of performance
aspects of Company B have been identified. The annual growth of Company B is 3%. The
annual revenue of the company ranges from USD 26 million to USD 27 million. Currently,
the number of aircraft possessed by Company B is 40. However, it plans to increase its
aircraft by adding three new models every year. The average age of the aircraft is 18 years.
This shows that Company B is making efforts in order to utilize its capacity in the best
possible way. However, with the increase in the age of the aircraft, the cost of maintenance
may also increase.
The current customer retention rate of Company B is 40%. This shows that the
company has not been much successful in establishing a strong customer base. However, the
acquisition of Company B can help in expanding the customer base of the parent company to
a certain extent. The current search occupancy rate is 62%. The annual employee turnover
rate is 18% which is higher than Company A.
a. Opportunity Cost
In order to acquire Company B, the opportunity cost that TransGlobal Airlines has to
bear is the cost of training the employees. As the turnover rate is 18%, the parent company
will have to invest more in employee training. It will help in improving the talent of the
employees and providing them with an opportunity to grow. Another significant cost is the
establishment of a customer portal in order to appeal to the target customers and increase the
seat occupancy rate.
b. Risks
There also exists a number of risks relating to the acquisition of Company B by
TransGlobal Airlines. One of the risks is a cultural risk. The difference in culture may make it
challenging for the effective integration of both companies. The financial and operational risk
is medium. The overall risk ranges between medium to low.
On the basis of the analysis, it is recommended that TransGlobal Airlines must
proceed to acquire Company A. This acquisition can provide the company with more benefits
in comparison to the associated cost. It will help the company to expand effectively, acquire
new customers, and grow its revenue.
Akpoviroro, K. S., & Owotutu, S. O. (2018). Impact of external business environment on
organizational performance.DInternational Journal of Advance Research and Innovative
Ideas in Education,D4(3), 498-505.
Halmaghi, E. E., Iancu, D., & Băcilă, M. L. (2017). The organization's internal environment
and its importance in the organization's development. InDInternational Conference
Knowledge-Based OrganizationD(Vol. 23, No. 1, pp. 378-381).
King, E. (2009). Economic vs. Accounting Profit Rates. InDTransfer Pricing and Corporate
TaxationD(pp. 7-10). Springer, New York, NY.
Politeknik NSC surabaya: Business Administration. Politeknik NSC Surabaya | Business
Administration. (2021). Retrieved February 9, 2022, from
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