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Performance Evaluation Report

Performance Evaluation Report

TransGlobal Airlines Situation Analysis

Internal Environment

The airline sector employs up to 40,000 people and has developed a corporate culture that values open communication, innovation, and teamwork (Gil & Kim, 2021). The firm, TransGlobal Airlines, created in 1951, had to shift from a monopolistic situation to a more competitive industry that needed collaboration and strategic management to achieve its long-term excellence aim. Leadership talents and a supportive work environment inspire employees to participate actively in their professional development. Notably, this helps the company’s internal operations and procedures.

TransGlobal Airlines’ board of directors is ultimately in charge of all major strategic decisions. It is important to note that they play a significant role in developing and implementing strategic objectives. A hierarchical structure encourages long-term performance in the organization, which is headed by the CEO, vice president, CFO/COO, sales Deputy President, and subsidiaries. Many successful firms, like TransGlobal Airlines, have used this organizational leadership structure (Rehman et al., 2019). TransGlobal Airlines is continually looking for methods to enhance the customer service stages of its internal operations. Among the traits that these systems impart are advancements in reservation technology and digital technology. Mobile apps will be integrated with other services like lodging and transportation in the project’s scope. TransGlobal Airlines workers may use the procedures and systems in place. Anyone may acquire the training they desire or require, like the two-hour FAA SAS course that is a prerequisite.

TransGlobal Airlines employs about 40,000 individuals in various locations across the globe. When the firm was founded in 1951, it was based in Miami. However, the FAA SAS training is available via a package offered under TransGlobal Airlines’ extensive training. Employees at TransGlobal Airlines are concerned about the company’s ability to provide them with training opportunities to help them advance in their professions. TransGlobal Airlines, on the other hand, is expected to bring in a greater profit. Workers at the firm are compensated fairly and given incentives. These perks are intended to entice new employees to join the company while encouraging current employees to stay (Gupta & Shaw, 2014). In the “Worlds Best Workplaces” ranking, TransGlobal Airlines aims to be one of the top ten employers by 2030. However, the firm has not yet reached the ranks of the world’s most valuable companies.

TransGlobal Airlines offers flights to and from cities all around the world. The company owns a fleet of more than 1,000 aircraft. As additional planes come online, the fleet’s age will gradually increase. Net-zero emissions are also being considered a goal for the corporation by 2075. Efforts to improve carbon offset rules and research and development of fuel-efficient aircraft are presently underway. While the MAX 737 was formerly seen as a high-risk aircraft, it is currently being reintroduced safely as part of the company’s efforts to improve its safety ratings on Airlines.com and elsewhere. By employing both strategies at the same time, the company can improve both its safety and its revenue.

Moreover, the firm earns $13.2 billion in total sales and $1.5 million in net profit annually. Net income and total cash on hand both increased from year one to year three, a sign of solid financial health. Over the last several years, the company’s profits per share have improved by more than 30 percent. The company’s results for the year were a 7.7 percent rise in domestic income and a 1.6 percent increase in the number of air travelers. Both the Atlantic and Latin regions generated large profit margins. The Pacific area had just a 0.5 percent drop in revenue. The corporation spends an average of 59 percent of its sales on the cost of products sold and 35 percent on other expenditures. Specifically, common size percentages help in determining where the bulk of the company’s resources are invested (Ahmed & Safdar, 2018). As a result, the cost of items supplied will rise if TransGlobal Airlines acquires Company A.

External Environment

TransGlobal Airlines faces stiff competition in the market. Most domestic and foreign airlines compete with TransGlobal Airlines on a regular basis. Moreover, TransGlobal Airlines is the world’s second-largest airline. Southwest Airlines takes the number one spot in terms of the market size in the United States, with TransGlobal Airlines coming second. Nonetheless, TransGlobal Airlines is upgrading its planes and reservation systems to expand its customer base in both segments. In terms of the market and customers, the company has an 80 percent customer retention rate and a 27 percent growth rate for new customers, with a 278 billion traveler-mile range. In addition, TransGlobal Airlines has investors from all around the globe. TransGlobal Airlines flies to 242 locations in 52 countries, making it the world’s most popular airline. Notably, this airline’s specializations include economy, first-class, luxury, and business-class travel. TransGlobal Airlines also aims to treat its customers with respect, improve brand loyalty, and establish rational connections with all its passengers and crew members. Online bookings and mobile apps will allow the airline to outdo both American Airlines and Southwest Airlines in the worldwide market share contest.

Furthermore, TransGlobal Airlines adheres to all applicable rules and regulations at each of its destinations. All aircrew members should be well-versed in FAA and industry regulations. TransGlobal Airlines may also look at various possibilities in the inclusion of two-hour FAA SAS required training. In order to guarantee that all employees who are required to know the criteria are educated, more lessons and more time will be required.

TransGlobal Airlines relies heavily on its suppliers for its success. Wholesalers distributing gasoline are the largest supply source. If there had been no gasoline, there would be no flights and no revenue for the company. Luxury goods and refreshments on board TransGlobal Airlines’ flights are also heavily reliant on third-party vendors. Low-cost fliers receive lower-quality objects as compared to their more efficient counterparts. Each of these variables affects the overall performance of TransGlobal Airlines. Additionally, the airline collaborates with a wide range of service providers to ensure that the airline’s customers have a positive experience on board. Investors are another important group of stakeholders because they significantly impact the financial health and competitiveness of the business.

Balanced Scorecard Analysis of Company A

Opportunity

Before making a Company A purchase, TransGlobal Airlines has some benefits to consider. Company A is expected to have $30 million in net sales in the first year, a growth from its current $28 million profit level. The trend is expected to continue for the next three years, resulting in a 25% increase in net profit. When TransGlobal Airlines buys company B, it will generate more revenue, including profits that can be used to reduce costs. As a result, the cost of purchasing the company exceeds its annual revenue. The purchase of Company A will allow TransGlobal Airlines to gain access to its routes, aircraft, and customer base. The addition of Company A would make it easier for the company to gain access to new markets and to turn customer competition into opportunities for benefit and revenue growth in consumer destinations. In other words, consumer proposals will cost $2050 to implement, but the business will make a sizable profit from it.

Corporate culture drives everything from customer service, reservation systems, and on-site operations to the company’s overall success. TransGlobal Airlines intends to boost its processes and create a long-term strategy that will benefit the company by investing more than 20 percent of its current value. Putting the plan into action will only cost $950, a significant saving over the final product’s estimated retail price of $2,000. Consideration of the organization’s ultimate growth plan acquires Company A as a worthwhile investment.

Risk

Most of the risks connected with the purchase of Company A are predicated on what would happen if all acquisition forecast outcomes were not met. As a result of its declining performance, a purchase of Company A does not seem attractive. Notably, this is the riskiest part of the acquisition process: when a business buys a company whose operations are anticipated to be recovered through the transactions of that company, a significant financial commitment is required. Delays in financial predictions might jeopardize the viability of the firm.

As a consequence, it is still feasible to maintain a heritage of great success. Operating expectations are still pretty lofty at this point. As an alternative, changes in the firm’s culture and operational procedures will not hurt the company due to its high cost and controlled profitability. Notably, this report has the lowest risk due to the fact that there were no changes made to all the 15 pre-existing consumer destinations or market categories. In spite of this, the purchase is aimed at making it simpler for passengers to choose a single airline. Company A’s acquisition by TransGlobal Airlines will allow it to expand its client base and improve its customer service. Acquisition of Company A reduces risk to a minimum for investors.

Balanced Scorecard Analysis of Company B

Opportunity cost

Due to its yearly sales of between $11 and $12 million, TransGlobal Airlines must spend close to the worth of Company B if it plans on acquiring the latter company. This number is not a big deal, given the company’s revenues and profits. Acquisition costs are also linked to Company B’s planned results and growth, which are expected to increase yearly sales, the percentage of growth, annual revenues, and cash position. The acquisition of Company B will increase the company’s value by 2.5 percent and add an extra one percent every year for the next five years. As a result, the expected revenue of Company B and the impact on TransGlobal Airlines are limited for this small company.

Based on their concentration on increasing seat occupation by 1% per year from 62% in the consumer sector, Company B’s long-term investment strategy would be prohibitively costly. The in-flight amenities and beverage selections will be enhanced by more than 50% to help Company B meet this goal. The employee turnover rate for Company B is 18%. Company B wants to cut that price in half. For this reason, Company B is contemplating funding a more comprehensive training program for all workers, no matter their position or level of responsibility. Also, the organization is improving booking and ticketing processes. SITA Horizon’s system software and Company B’s software recently formed a joint venture. Due to this new technology, Company B can provide clients with an industry-standard user interface and perform accounting functions directly inside the application. The internal processes of the organization, which must be executed, are also accurately calculated. Notably, $9,000 is the cost per implementation in order to foster online growth and joint ventures, public support, service dependability, new guidelines and plans, and asset optimization.

Risk

While the acquisition of TransGlobal Airlines comes with some risk, it is more than offset by the low profit margin of Company B. However, recouping the initial investment would take a long time. Company B’s existing financial situation means that the money spent in Company B will take longer to attain the parent company’s acquisition target. As a result, the risks associated with the acquisition of Company B rely on the financial state and the acquisition results.

There is a moderate operational risk associated with the purchase of Company B. There will be a major adjustment to operational processes and a major cultural transformation as a result of Company B’s acquisition, which reduces risk to medium. The 2030 strategic plan and goals of TransGlobal Airlines will assist the airline in modernizing its operations and increasing revenue. TransGlobal Airlines’ results might yet be impacted in a negative way.

The company currently provides eight different sites to tourists, business travelers, and locals alike, each with its own unique set of services and amenities. There is a 40% customer retention rate, and 62% of the seats are still available. Despite the fact that the TransGlobal Airlines market is huge and already fully filled by the company’s present clients, there will be no change in the market at all. The return on investment and risk for the purchase of Company B is quite low.

References

Ahmed, A. S., & Safdar, I. (2018). Dissecting stock price momentum using financial statement analysis. Accounting & Finance58, 3-43.

Gil, R., & Kim, M. (2021). Does competition increase quality? Evidence from the US airline industry. International Journal of Industrial Organization77, 102742.

Gupta, N., & Shaw, J. D. (2014). Employee compensation: The neglected area of HRM research. Human resource management review24(1), 1-4.

Moriarity, S., Hopkins, L., & Slessor, A. (2020). TransGlobal Airlines. Management Accounting Case Book: Cases from the IMA Educational Case Journal, 229.

Rehman, S. U., Mohamed, R., & Ayoub, H. (2019). The mediating role of organizational capabilities between organizational performance and its determinants. Journal of Global Entrepreneurship Research9(1), 1-23.

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Question 


Scenario
You have been asked to evaluate Company A and Company B and make your recommendation for acquiring one or both companies. Based on your initial assessment, you have created balanced scorecards for both companies. You are now ready to analyze the information you have gathered so far about the two companies so that you can compare the costs, benefits, and risks associated with acquiring each company and make a well-informed decision.

Performance Evaluation Report

Performance Evaluation Report

In this milestone, you will first analyze the current situation of TransGlobal Airlines using the given data and other sources to understand its business environment. You will also evaluate the performance of Company A and Company B using the balanced scorecards you created in Milestone One.

Prompt
Write a report with your performance evaluation of the three companies involved in the acquisition.

Specifically, you must address the following rubric criteria:

Situation Analysis of TransGlobal Airlines (parent company). Use the provided TransGlobal Company Information and Financials to highlight the company’s current business environment.

Internal environment: culture, leadership, internal processes, human resources, operations, and financial performance

External environment: competitive, market, regulatory, customers, suppliers, and other relevant stakeholders

Balanced Scorecard Analysis of Company A. Using the balanced scorecard for Company A from Milestone One, describe your analysis of Company A’s performance. Perform a cost-benefit-risk analysis to explain whether the benefits justify the costs of acquisition.

Opportunity cost: What will it cost to move forward with this opportunity?

Risk: Identify and explain the magnitude (low, medium, or high) of the risks this acquisition poses to the parent company related to its market, financial, cultural, and operational environments.

Balanced Scorecard Analysis of Company B. Using the balanced scorecard for Company B from Milestone One, describe your analysis of Company B’s performance. Perform a cost-benefit-risk analysis to explain whether the benefits justify the costs of acquisition.

Opportunity cost: What will it cost to move forward with this opportunity?

Risk: Identify and explain the magnitude (low, medium, or high) of the risks this acquisition poses to the parent company related to its market, financial, cultural, and operational environments.

Guidelines for Submission
Submit a 6- to 8-page Word document using double spacing, 12-point Times New Roman font, and one-inch margins. If references are included, they should be cited in APA format. Consult the Shapiro Library APA style guide for more information on citations.

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