Prof Double R

 

You are a former pilot who is now the controller of a division of TransGlobal Airlines, which utilizes a fleet of corporate jets for charter at several airports in the southeast part of the United States. Your division’s private charter clients include several Fortune 500 companies in the region. The Chief Financial Officer (CFO) has informed you that the company is considering the acquisition of two smaller aviation firms in the Caribbean specializing in chartered flights for luxury vacations using light aircraft (60 passengers or less). The CFO has tasked you with assessing the organizational benefits of acquiring these aviation firms. The CFO intends to develop a new business plan for the organization if your analysis recommends moving forward with the acquisition.

 

After an initial assessment, the company has shortlisted two airlines they want to examine further for acquisition. To understand all aspects of the two airlines under consideration, you have visited each proposed site to assess their performance. The assessment includes creating and analyzing a balanced scorecard for each airline with all four components—financial, internal processes, customers/market, and learning and growth—that will impact the acquisition.

Prompt

Use the

Basic Balanced Scorecard Template

to create a balanced scorecard for each company. Specifically, you must address the following rubric criteria:

1. Use the data given in Company A Information and Company A Financials to create a balanced scorecard for Company A. The balanced scorecard should highlight strategic objectives and key performance indicators (KPIs), such as net profit, annual growth, and market share, and include the four components:

   Financial: Complete the financial section of the balanced scorecard template, identifying two of the most relevant KPIs associated with the strategic objective you’ve identified.

   Explain your rationale for the KPIs chosen, with an explanation of the cause–effect relationship between the chosen KPIs and the KPI action plan details.

   Internal Processes: Complete the internal processes section of the balanced scorecard template, identifying two of the most relevant KPIs associated with the strategic objective you’ve identified.

   Explain your rationale for the KPIs chosen, with an explanation of the cause–effect relationship between the chosen KPIs and the KPI action plan details.

   Customers/Market: Complete the customers/market section of the balanced scorecard template, identifying two of the most relevant KPIs associated with the strategic objective you’ve identified.

   Explain your rationale for the KPIs chosen, with an explanation of the cause–effect relationship between the chosen KPIs and the KPI action plan details.

   Learning and Growth: Complete the learning and growth section of the balanced scorecard template, identifying two of the most relevant KPIs associated with the strategic objective you’ve identified.

   Explain your rationale for the KPIs chosen, with an explanation of the cause–effect relationship between the chosen KPIs and the KPI action plan details.

2. Use the data given in Company B Information and Company B Financials to create a balanced scorecard for Company B. The balanced scorecard should highlight KPIs, such as net profit, annual growth, and market share, and include the four components:

   Financial: Complete the financial section of the balanced scorecard template, identifying two of the most relevant KPIs associated with the strategic objective you’ve identified.

   Explain your rationale for the KPIs chosen, with an explanation of the cause–effect relationship between the chosen KPIs and the KPI action plan details.

   Internal Processes: Complete the internal processes section of the balanced scorecard template, identifying two of the most relevant KPIs associated with the strategic objective you’ve identified.

   Explain your rationale for the KPIs chosen, with an explanation of the cause–effect relationship between the chosen KPIs and the KPI action plan details.

   Customers/Market: Complete the customers/market section of the balanced scorecard template, identifying two of the most relevant KPIs associated with the strategic objective you’ve identified.

   Explain your rationale for the KPIs chosen, with an explanation of the cause–effect relationship between the chosen KPIs and the KPI action plan details.

   Learning and Growth: Complete the learning and growth section of the balanced scorecard template, identifying two of the most relevant KPIs associated with the strategic objective you’ve identified.

   Explain your rationale for the KPIs chosen, with an explanation of the cause–effect relationship between the chosen KPIs and the KPI action plan details.

Balanced Scorecard-Company A

]

Category

SELECTION RATIONALE

FINANCIAL

INTERNAL PROCESSES

CUSTOMER/MARKET

LEARNING AND GROWTH

BASIC BALANCED SCORECARD – Company A

COMPANY NAME

ADDRESS

[Insert text

CITY

STATE

ZIP

Category

STRATEGIC OBJECTIVES

KEY PERFORMANCE INDICATORS

KPI TARGET VALUES

KPI ACTION PLAN DETAILS

KPI

SELECTION RATIONALE

YEAR 1

YEAR 2

YEAR 3

EXAMPLES OF PROGRAMS/INITIATIVES

BUDGETS

CAUSE–EFFECT RELATIONSHIP

FINANCIAL

[Provide examples of supporting programs or initiatives in this column.]

[Provide budget allocations for the supporting programs or initiatives in this column.]

[Share your rationale behind your prioritization of the KPIs in this column.]

[Identify the main cause–effect relationships between your chosen KPIs in this column.]

INTERNAL PROCESSES

CUSTOMER/MARKET

LEARNING AND GROWTH

Balanced Scorecard-Company B

COMPANY NAME

ADDRESS
[Insert text

CITY

STATE

ZIP

Category
STRATEGIC OBJECTIVES
KEY PERFORMANCE INDICATORS
KPI TARGET VALUES

KPI ACTION PLAN DETAILS

Category

YEAR 1
YEAR 2
YEAR 3
EXAMPLES OF PROGRAMS/INITIATIVES

BUDGETS

SELECTION RATIONALE
CAUSE–EFFECT RELATIONSHIP

FINANCIAL

[Provide examples of supporting programs or initiatives in this column.]

[Provide budget allocations for the supporting programs or initiatives in this column.]

[Share your rationale behind your prioritization of the KPIs in this column.]
[Identify the main cause–effect relationships between your chosen KPIs in this column.]
FINANCIAL

INTERNAL PROCESSES

INTERNAL PROCESSES

CUSTOMER/MARKET

CUSTOMER/MARKET

LEARNING AND GROWTH

LEARNING AND GROWTH

BASIC BALANCED SCORECARD – Company B

KPI SELECTION RATIONALE

COMPANY A

Three

–

Year Data

COMPANY A

1,804
1,804

2,806

900
900

2017
2018
2019

30,000

33,685
33,685

Shareholders’ Equity

104,136
104,334
86,439

2017
2018
2019

Net Earnings

1,846
(170)
2,380

2,814
2,806
2,806

)

(2,800)

2,706
(2,800)
(2,800)

of Debt

–
–

–
–
–

–
–
(20,000)

62,265
61,708

62,265
61,708
44,319

Accounts Receivable

1,380
1,419
1,460

Inventory

3,078
3,799
3,257

Accounts Payable

1,560
1,926
1,651

(10,312)
394
(226)

37,413

2,706
2,800
2,800

2,814
2,806
2,806

37,413
37,407

30,000
30,000
30,000

Issuance (repayment)

–
–
(20,000)

30,000
30,000
10,000

900
900
900

A_CO_FIN	Learner Copy	Rev 6/19/21
Illlustrative Data for Educational Purposes
All values shown are in thousands.
		2017			2018			2019
Income Statement
Revenue	27,981	28,772	29,580
Cost of Goods Sold (COGS)	15,389	18,997	16,285
Gross Profit	12,592	9,775	13,295
Expenses
Salaries and Benefits	4,510	4,500	4,480
Rent and Overhead			1,804
Depreciation and Amortization			2,814						2,806
Interest						900
Total Expenses	10,028	10,010	9,990
Earnings Before Tax	2,564	(235)	3,305
Taxes	718	(65)	925
	Net Earnings		1,846		(170)		2,380
Balance Sheet
Assets
Cash			62,265			61,708		44,319
	Accounts Receivable		1,380		1,419		1,460
	Inventory		3,078		3,799		3,257
Property and Equipment			37,413	37,408	37,403
Total Assets		104,136		104,334		86,439
Liabilities
	Accounts Payable		1,560		1,926		1,651
Debt							30,000		10,000
Total Liabilities	31,560	31,926	11,651
	Shareholders’ Equity
Equity Capital			33,685
Retained Earnings	38,891	38,723	41,103
72,576	72,408	74,788
Total Liabilities and Shareholders’ Equity
Cash Flow Statement
Operating Cash Flow
Plus: Depreciation and Amortization
Less: Changes in Working Capital		(10,312)		394		(226)
Cash from Operations	14,972	2,242	5,411
Investing Cash Flow
Sales (Investments) in Property and Equipment			2,706				(		2,800
Cash from Investing
Financing Cash Flow
	Issuance (repayment)			(20,000)
Issuance (repayment) of Equity
Cash from Financing
Net Increase (decrease) in Cash	17,678	(558)	(17,389)
Opening Cash Balance	44,587
Closing Cash Balance
Supporting Schedules
Working Capital Schedule
Net Working Capital (NWC)	2,898	3,292	3,066
Change in NWC
Depreciation Schedule
PPE Opening	37,521		37,407
Plus Capex
Less Depreciation
PPE Closing	37,402
Debt and Interest Schedule
Debt Opening
Debt Closing
Interest Expense

image1

COMPANY B

Three

–

Year Data

COMPANY B

2,910

1,354
1,354

1,800

21

2017
2018
2019

90,000

33,685
33,685

Shareholders’ Equity

124,316
123,236
113,301

2017
2018
2019

Net Earnings

2,025
(529)
79

2,814
2,806
2,776

25

)

)

)

(2,706)
(2,400)
(2,800)

of Debt

–
–

–
–
–

–
–
(10,000)

82,445
82,914

82,445
82,914
72,944

Accounts Receivable

1,380
1,297
1,336

Inventory

3,078
2,018
1,989

Accounts Payable

1,560
1,009
995

2,306

(10,312)
(592)
25

37,413
37,007

2,706
2,400
2,800

2,814
2,806
2,776

37,413
37,007
37,032

90,000
90,000
90,000

Issuance (repayment)

–
–
(10,000)

90,000
90,000
80,000

2,700
1,800
1,800

																																																																																																												B_CO_FINANCE	Learner Copy	Rev 3/14/	21
Illlustrative Data for Educational Purposes
All values shown are in thousands.
		2017			2018			2019
Income Statement
Revenue	27,981	26,302	27,091
Cost of Goods Sold (COGS)	15,389	18,411	18,151
Gross Profit	12,591	7,891	8,940
Expenses
Salaries and Benefits		2,910	2,600
Rent and Overhead			1,354
Depreciation and Amortization			2,814			2,806			2,776
Interest		2,700				1,800
Total Expenses	9,778	8,560	8,840
Earnings Before Tax	2,813	(669)	100
Taxes	788	(141)
	Net Earnings		2,0		25		(529)		79
Balance Sheet
Assets
Cash			82,445			82,914		72,944
	Accounts Receivable		1,380		1,297		1,336
	Inventory		3,078		2,018		1,989
Property and Equipment			37,413			37,007		37,032
Total Assets		124,316		123,236		113,301
Liabilities
	Accounts Payable		1,560		1,009		995
Debt							90,000		80,000
Total Liabilities	91,560	91,009	80,995
	Shareholders’ Equity
Equity Capital			33,685
Retained Earnings	(929)	(1,458)	(1,379)
32,756	32,227	3	2,306
Total Liabilities and Shareholders’ Equity
Cash Flow Statement
Operating Cash Flow
Plus: Depreciation and Amortization
Less: Changes in Working Capital		(10,312)		(592)
Cash from Operations	15,151	2,869	2,830
Investing Cash Flow
Investments in Property and Equipment		(	2,706		(	2,400		(	2,800
Cash from Investing
Financing Cash Flow
	Issuance (repayment)			(10,000)
Issuance (repayment) of Equity
Cash from Financing
Net Increase (decrease) in Cash	12,445	469	(9,970)
Opening Cash Balance	70,000
Closing Cash Balance
Supporting Schedules
Working Capital Schedule
Net Working Capital (NWC)	2,898	2,331
Change in NWC
Depreciation Schedule
PPE Opening	37,521
Plus Capex
Less Depreciation
PPE Closing
Debt and Interest Schedule
Debt Opening
Debt Closing
Interest Expense

image1

MBA 620 Company B Information

Location, Size, and Age of the Firm

• Name:
• Location: Orlando, FL
• Size: 98 employees
• Age: began operations in 1988

Customer Segment and Target Market

• Market: Florida and nearby destinations

• Destinations: eight (the Bahama Islands; Savannah, Georgia; Atlanta, Georgia; Tampa, Florida; Fort
Myers, Florida; Miami, Florida; Tallahassee, Florida; and New Orleans, Louisiana)

• Market segment: tourists and business

• Aircraft capacities: 12–50 seats

• Customer segment: vacationers, tourists, business travelers

• Retention: 40% repeat customers

• Seat occupancy average: 62% (middle of industry benchmark data)

• Average customer fare: $249 USD

Major Competitors

• Delta Connection

• American Eagle

• Sun Country

• Frontier

Company Leadership

Privately held, with a board, president, VP admin, CFO, COO, VP sales

Company Strategy and Direction

As a smaller player, the company is more of a follower than a leader; however, the new president has a desire to
shake things up. The image of the company as cheap transportation is no longer sufficient, and the leadership
team seeks to demonstrate that even a small company can be an innovation leader. They hope to do this by
emphasizing the potential benefits of agile problem solving and a lean and clean working environment.

These 10-year goals were adopted in 2015; they were reaffirmed in 2019 shortly before the arrival of the new
president:

• Demonstrate adaptability, flexibility, and speed in decision making and innovation

• Build the best workforce; be a winning team

• Do the right thing; provide excellence in customer service

• Enjoy the short run; invest in the long run

Current Financial Highlights

• Annual revenues: $26-27 million

• Annual growth YoY: 3%

• Gross profit margin: 33%

• Net profit margin: 0.2%

• Aircraft in fleet: 40

• Average age of aircraft: 18 years (25 years of useful life is typical)

• See financial statements for more information

Background

• The company is known as a value leader.

• In 2016, the company sold its ownership in a regional hotel chain, resulting in substantial cash holdings.

• The company has strong business relationships with area employers in the theme park industry.

• The company president is new this year; prior experience has been heavily influenced by organizational
transformation initiatives.

• Turnover among employees is higher than many airline companies, but average for the central Florida
economy; maintenance employees are increasingly more difficult to find and retain; overtime is common
in the maintenance department.

• Wage levels in the Orlando area are growing, resulting in upward pressure in compensation.

• Customer feedback received that is at or above industry benchmarks (at industry benchmarks 60th
percentile or higher; positive feedback):

o Short wait times at counter
o Ease of modifying reservations
o Cost
o Overall value

• Customer feedback received below industry midpoint (negative feedback):
o Airplane cleanliness
o Amenities
o Food and beverages
o In-flight noise

Internal Process Highlights

• Within the last 30 days, an investment and joint venture was established with SITA Horizon software
system, including an industry-standard customer portal and a hospitality industry interface functionality.

• Bookkeeping is integrated with the new SITA system; an external accounting firm will still be used for
audits.

• HR function is provided by a consortium partner in the local area (outsourced).

• On-ground operations teams rated fair against industry-wide efficiency standards.

Human Resource Highlights

• Employees with a high school diploma or higher: 95%

• Employees with a post-secondary degree or diploma: 60%

• Average turnover rate: 18% annually

• Internal training offered:
o Regulatory refresher courses (as needed, with supervisor approval)
o Quality and Customer Service Principles (self-study)

MBA 620 Company B Information

Location, Size, and Age of the Firm

Customer Segment and Target Market

Major Competitors

Company Leadership

Company Strategy and Direction

Current Financial Highlights

Background

Internal Process Highlights

Human Resource Highlights

MBA 620 Company A Information

Location, Size, and Age of the Firm

• Name:
• Location: Miami, FL
• Size: 165 employees
• Age: began operations in 1981

Customer Segment and Target Market

• Market: Caribbean Islands
• Destinations: 15 (Guadeloupe, Guyana, Martinique, Puerto Rico, St. Kitts, St. Lucia, St. Maarten, St.

Thomas, St. Vincent, Trinidad, Antigua and Barbuda, Barbados, British Virgin Islands, Dominica,
Grenada, and Tobago)

• Market segment: luxury tourist and business class
• Aircraft capacities: 20 to 60
• Market share of Caribbean destination airlines: 4th at 18.9%
• Customer segment: vacationers, tourists, Caribbean business, and government clients
• Retention: 66% return customers
• New customer growth: 22% annually
• Seat occupancy average: 74% (top quarter of benchmarks)
• Average customer fare: $450 USD

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

Company Strategy and Direction

The company is well positioned for a transition and strategic investment. Its cash position is especially
positive, providing ample flexibility. Long known as a premium upscale provider, there is an awareness of
the need to broaden the customer base, attract younger travelers, and modernize both the fleet of aircraft
and customer-facing technologies.

The president and leadership team have adopted these goals for the coming five years:

• Improve public image and brand in ways that attract new customers
• Improve employee retention; reduce turnover by half
• Address aging fleet of aircraft; reduce average age of fleet to eight years
• Achieve 20% improved fuel efficiency; leverage this into brand and public promotions
• Reduce on-ground aircraft turnaround time from two hours down to 45 minutes (industry average

is 90 minutes)

Current Financial Highlights

• Annual revenues: $28–29 million
• Annual growth YoY: 2.5–2.9%
• Gross profit margin: 45%
• Net profit margin: 8%
• Aircraft in fleet: 55
• Average age of aircraft: 14 years (25 years of useful life is typical)
• See financial statements for further details

Background

• The company is recognized as a premium provider.
• In 2016, the company sold a portion of its fleet and its real estate holdings, resulting in a substantial

influx of cash.
• Employees (excluding pilots) have frequently discussed unionizing, but have not acted in this

direction.
• The management team is experienced and focused on revenue growth and customer satisfaction.
• Customer feedback at or above industry benchmarks (at industry benchmarks 60th percentile or

higher; positive feedback):
o On-time arrivals/departures
o Airplane cleanliness
o Amenities
o Employee courtesy
o In-flight entertainment

• Customer feedback below industry midpoint (negative feedback):
o Frequent flier program (none)
o Check-in convenience and speed
o Baggage handling
o Convenient departure times

Internal Process Highlights

• The reservation system is an early version of Radixx Galaxy; cloud-based upgrades have not been
implemented.

• Customer check-in and ticketing is manually processed using hard-copy tickets.
• Bookkeeping is accomplished using QuickBooks and an external accounting firm.
• HR hiring and benefits packages are administered by a third-party provider.
• On-ground operations teams rated very good against industry-standard benchmarks.

Human Resource Highlights
• Employees: 165
• Employees with a post-secondary degree (two-year or higher): 75%
• Average turnover rate: 12% annually
• Internal training offered:

o FAA Basics (five-day course, required of all new employees)
o FAA Safety Assurance System (online two-hour course; all new hires)
o Customer Service (eight hours annually)
o Regulation refreshers (20 hours per year)
o Quality Control Through Six Sigma (optional, up to eight hours per year)
o Using MS Office (on-demand, online offerings; optional

MBA 620 Company A Information

Location, Size, and Age of the Firm

Customer Segment and Target Market

Major Competitors

Company Leadership

Company Strategy and Direction

Current Financial Highlights

Background

Internal Process Highlights