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MBA 620, Milestone Two, Module Six: Measuring Success in an Organization

Destiny Mckoy

Southern New Hampshire University

06/23/2024
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MBA 620, Milestone Two, Module Six: Measuring Success in an Organization

TransGlobal Airlines is one of the United States of America's reputable organizations that

the government owns. The airline sector has seen the corporation enjoy a monopoly.

TransGlobal Airlines is intending to grow its operations and buy other businesses. This paper

aims to clarify and assess the performances of companies participating in the purchase process:

TransGlobal Airlines, Company A, and Company B. To make well-informed selections

regarding the purchase; the report will also evaluate the advantages, expenses, as well as hazards

connected to every one of the organizations. A balanced scorecard has been developed for both

Company A and Company B based on the first evaluation of them. We are then examining the

data thus far on the two companies so that we may evaluate the costs, advantages, and risks

connected to acquiring each one and make a wise selection. Using the provided data, the

following details will evaluate TransGlobal Airline’s present status generally in order to grasp

their business environment. At last, we will assess Company B's performance as well as

Company A utilizing the balance scorecards already developed.

Situation Analysis of TransGlobal Airlines

TransGlobal Airlines is one of the publicly held organizations that was first established

way back in 1951. Employing about 40,000 people, they operate out of Miami, Florida. While

serving a worldwide environment, TransGlobal Airlines is rather prevalent in the United States.

Currently serving approximately fifty-two nations across six continents around the globe,

TransGlobal Airline travels to a total of 242 locations. Recently, the organization's board of

directors approved a comprehensive strategy referred to as TransGlobal 2030. The plan came

about as a result of due consideration in eight months of collecting the necessary data on the

ground, client focus groups and staff comments that have produced the plan.
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TransGlobal Airlines Internal Environment

TransGlobal Airline is headquartered in Miami, Florida. With a workforce of over 40,000

individuals, the airline has to maintain efficiency through daily operations. In 1951, the airline

was opened for business. With a successful growth of 18% in its market share worldwide, the

airline became the second largest in history. Flying between six continents, TransGlobal Airlines

visits 52 countries and 242 destinations. The airline has gained a reputation for providing award,

economy class, business class and luxury class to its passengers. This is true. TransGlobal

Airlines continues to work hard to grow and expand its operational statistics to demonstrate that

the airline is striving to shape the market across the enterprise. The internal environment within

an organization consists of culture, management, internal procedures, human resources,

operations and financial indicators. The values of the business culture are innovation,

collaboration and excellent customer service. The Board of Directors governs the company and

their leadership flows through the President, CIO, CFO, COO and Director of Sales. The

management of this company uses a chain-of-command approach at every level, reporting to top

management and the board of directors (Moriarity et al., 2020). Managing a business enables it

to succeed by ensuring that managers and department heads at all levels deliver excellent and

effective communication that ensures business objectives are met. Representation.

The board members made several strategic decisions mostly aimed at strategic execution

in order to reach the company's target of being the top airline worldwide by 2030. The airline's

annual net income is $2.099 billion, while its total income comes at $20.683 billion. Including

1.6% in passenger units, the company's domestic sales increased by 7.7% in the past quarter.

From last year, Pacific unit sales dropped 4.4% to 0.5%, therefore reflecting a general drop in net

sales. Atlantis's turnover rose even if their expansion was just 0.8%.
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TransGlobal Airlines External Environment

The external environment of any organization entails competition from the competing

organizations, market, laws, consumers, suppliers, and other pertinent players make. TransGlobal

Airlines competes with every domestic and global American airline. The organization is a

worldwide airline with a greater share in the American market sector. The airline lives in a very

competitive market. Flying between six continents, the TransGlobal airline reaches fisty-two

nations with two-hundred and forty-two destinations. The year 1951 saw the airline open for

business. The airline has been able to effectively raise its market share in the US to 18.3%,

enabling it to be positioned as the second airline in the United States of America's market during

the period it has been open. Given the 19.1% in the United States of America's market share of

the top ranked airline, this number is seen as amazing. All airlines must act as they should and

keep raising their market share instead of lagging behind any other airline, as the penetration

rates and market share are rather similar. With a 27% yearly increase in new business and almost

80% of its passengers returning, the airline today boasts TransGlobal's vast spectrum of suppliers

helps to build the fuel, aircraft, food, passenger safety, and more in line of business (Fernando,

2022). Investors play a somewhat important part in the company. The company's financial

situation and general performance reflect the investors' involvement.

Balanced Scorecard Analysis of Company A

 Opportunity Cost

Opportunity cost is analyzed to link each goal Company A has in mind with the

appropriate strategic direction. Opportunity cost is what you must sacrifice in terms of other

products and services in order to purchase what you want. Looking at the organization's

opportunity costs, one can observe that they reflect any possible advantages for a variety of
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purposes, including a company trying to decide on one alternative or another. Should a company

decide on one investment above another, it must be able to fully comprehend the consequences

of that decision to enable better decision-making. If one wants to forecast the opportunity cost of

Company A if it is acquired, one must consider several elements. Among the elements are their

financial background, learning and development, and client or market behavior. Understanding

the finances of Company A and knowing the finances at TransGlobal would help one to decide

whether it would be a wise investment to acquire it into TransGlobal Airlines.

To forecast the company's future development, it is essential to analyze its past financial

records, as this information can assist in assessing potential opportunity costs. Company A is

profitable. The company's income grew over three years from 2017 to 2019. In 2017, the

turnover was 27,981 thousand dollars; in 2018, it rose to 28,772 thousand dollars. By 2019, with

an adjusted net income of $2,380, the company has $86,439 in assets and $44,319 in cash flow.

Looking at the cash flow, which is 1174.6 million, TransGlobal has the funds to buy another

airline and have extra cash simultaneously. The cost of an airline transaction can range from

billions to millions, depending on the company's size. Company A is classified as a small airline

with a workforce of just 165 individuals. The scale of company A is comparable to that of

AirTran Airways, which Southwest Airlines bought for $7.5 million in 2008.

Ideally, TransGlobal should be able to buy Company A for $7.5-$8 million, keeping

Trans Global within its Budget. Company A is poised for 22% annual growth in new customers,

and Company A has proven to retain 66% of its returning customers. Its positive financial

performance is growing every year. TransGlobal may regard Company A's customer retention

rate as positive, as it can encourage all devoted customers to buy. Company A's average cost per

customer is $450, which is good. This could result in higher prices for customers as they can
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purchase their business and luxury class tickets, which also allows the airline to increase pricing

after finalization. This acquisition is a novel high-end airline that can facilitate greater

productivity in business affairs at such prices.

 Risk

TransGlobal's acquisition of Company A is believed to be of moderate risk. If the

purchase falls through, TransGlobal will lose $7.5 million to $8 million, as it does with any

purchase. Competition at Company A is fierce as its target audience includes government clients,

Caribbean businesses and tourists. Nevertheless, this situation is always susceptible to change

due to the possibility of customers switching to another carrier. Company A aims to alter its

image and appeal to younger demographics in order to compete with the current market. The

absence of an electronic ticket or customer registration system and loyalty program is notable for

Company A. Their systems are somewhat outdated. To improve Company A, TransGlobal must

use unanticipated funds to pay for its outsourced accounting and HR services. By bringing in all

the services, TransGlobal can also increase its staff and upgrade its systems. The merging of

company A with TransGlobal is considered a medium risk due to these reasons.

Balanced Scorecard Analysis of Company B

 Opportunity Cost

There are various factors that organizations should consider If they want to estimate

Company B's opportunity cost before acquiring it. Among the elements are their financial

background, learning and development, and client or market. Understanding the finances of

Company B and knowing the financial situation at TransGlobal would help one to decide

whether it would be wise to buy them into TransGlobal Airlines. Measuring far less than

Company A, Company B Currently flies to eight locations—Florida and the surrounding areas,
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among others—Company B Company B employs just ninety-eight people right now. Unlike

Company A, Company B's clientele consists of business travelers, visitors, and holidaymakers

(Ahmadov et al., 2021). Although Company B is not regarded as a luxury airline, the company is

well-known for its moral standards. 2016 saw Company B sell their ownership to a regional hotel

chain, therefore fostering close ties with other businesses in the theme park sector.

To forecast the future development of company B, it is essential to examine its past

financial statements, as this allows for an enhanced evaluation of opportunity costs. Compared to

company A, company B is considered less profitable. The company's revenue has declined in

three years, 2017-2019. Turnover in 2017 was 27,981 thousand dollars; In 2018, it decreased to

26,302 thousand dollars; In 2019, it barely rose to $27,091. The company's net profit also fell

from $2,025 in 2017 to $79 in 2019. TransGlobal may pay another airline due to its financial

situation. The price tag for an airline transaction can be as high as billions or even millions,

depending on the company's size. Company B's acquisition resembles the $18 million in the

1970 American Airlines-Trans Caribbean Airline merger. This type of merger is similar to that

of Company B, given its limited fleet and purpose. Given the financial return that Company B

needs to see for the merger to be successful, TransGlobal should be able to acquire it for $16-18

million. Company B's strategic financial goals are lowering team member turnover, increasing

net profit, and improving revenue development. Even with a strong cash position, we may need

to raise consumer prices to ensure compliance with all these expectations. Fixed interest rates for

opportunity costs mean the consumer may be reluctant to allocate additional funds. This could

cause long-term financial problems for Company B. Regarding a possible acquisition of

TransGlobal Airlines, their risk factor would be significant.

 Risk
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TransGlobal is acquiring Company B; hence, there is great risks involved. TransGlobal

stands to lose up to $18 million should the purchase fail, much as with any acquisition. With

Company B, the client retention rate is low and might seriously damage them. Their 40% total

return rate and 62% in-seat occupancy indicate their retention rate for present clients. Although

the average fare of a customer is $249, which is less than Company A, the fare may not be raised

since they do not attract luxury clients. Since many flights are not fully booked due to low

loyalty rates, the retention figures need to indicate a significant stream of income from all trips

(Fernando, 2022). The fact that the aircraft in Company B are all eighteen years old—just two

years short of their twenty-year lifespan—causes great worry that has to be addressed. Given

this, the whole fleet of aircraft would have to be replaced within two years of acquisition,

resulting in more money flowing into Company B. Another danger to the purchase is the

corporate culture. The annual turnover of company B is eighteen per cent on average. This figure

is much higher than that of most airlines.

For Company B, the partnership with other organizations means there will be increased

costs. Losing this opportunity could hurt their profits and customer retention. TransGlobal

Airlines has a medium risk here. Company B has the option to use its systems, which are already

in place by TransGlobal Airlines. Nevertheless, the acquisition of Company B and the

subsequent dissolution of their joint venture could result in an expensive situation for

TransGlobal Airlines. The improvement of ship facilities, cleanliness, and customer retention are

the main objectives of Company B's customers/marketing sector. The goal of retaining customers

is a broad and intricate objective that takes into account both learning and development, as well

as internal procedures and financial policies (Sese, 2023). These goals have a high opportunity

cost because we want to make sure we do our best to increase the defined variables. Company
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B's success in the market is dependent on improving the overall experience. The potential

acquisition of TransGlobal Airlines is considered medium risk. TransGlobal Airlines provides

Company B with the necessary resources to achieve success, making it a medium risk. However,

this airline may incur financial penalties from Trans Global.

Conclusion

In conclusion, when TransGlobal Airlines decides to acquire either companies A or B,

they will consider different factors to be taken into account. TransGlobal Airlines is one of the

most established United States of America's airlines and will eventually decide on their choice

using the subsequent opportunity cost and risk analysis. TransGlobal should pay a premium for

new work and other internal measures to retain employees and reduce turnover. While Company

B would have a different revenue than Company A, it has several advantages, except for cost-

cutting opportunities.
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References

Ahmadov, F., Mirzayeva, G., & Mammadov, I. (2021). Competitiveness Analysis of the Tourism

Sector in Azerbaijan and the Clustering Problem. Journal of Environmental Management

& Tourism, 12(8), 2240-2250.

Fernando, J. (2022). Opportunity cost formula, calculation, and what it can tell you. Retrieved

September 26, 2022, from https://www.investopedia.com/terms/o/opportunitycost.asp

Moriarity, S., Hopkins, L., & Slessor, A. (2020). TransGlobal Airlines. Management Accounting

Case Book: Cases from the IMA Educational Case Journal, 229.

Sese, L. (2023). Next Generation Aviation Professionals Contribution to the Safety Culture of

Selected Local Airlines. Available at SSRN 4554895.