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Scenario

You are a former Navy officer and fighter 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.

In this milestone, you will use the given information to create balanced scorecards for Company A and Company B.

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 key performance indicators, such as net profit, annual growth, and market share, and include the four components:
    1. Financial: Complete the financial section of the balanced scorecard template, identifying two of the most relevant key performance indicators.
      1. Explain your rationale for the KPIs chosen, with an explanation of the cause-and-effect relationship between the chosen KPIs.
    2. Internal Processes: Complete the internal processes section of the balanced scorecard template, identifying two of the most relevant key performance indicators. 
      1. Explain your rationale for the KPIs chosen, with an explanation of the cause-and-effect relationship between the chosen KPIs.
    3. Customers/Market: Complete the customers/market section of the balanced scorecard template, identifying two of the most relevant key performance indicators.
      1. Explain your rationale for the KPIs chosen, with an explanation of the cause-and-effect relationship between the chosen KPIs.
    4. Learning and Growth: Complete the customers/market section of the balanced scorecard template, identifying two of the most relevant key performance indicators.
      1. Explain your rationale for the KPIs chosen, with an explanation of the cause-and-effect relationship between the chosen KPIs.
  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 key performance indicators, such as net profit, annual growth, and market share, and include the four components:
    1. Financial: Complete the financial section of the balanced scorecard template, identifying two of the most relevant key performance indicators.
      1. Explain your rationale for the KPIs chosen, with an explanation of the cause-and-effect relationship between the chosen KPIs.
    2. Internal Processes: Complete the internal processes section of the balanced scorecard template, identifying two of the most relevant key performance indicators. 
      1. Explain your rationale for the KPIs chosen, with an explanation of the cause-and-effect relationship between the chosen KPIs.
    3. Customers/Market: Complete the customers/market section of the balanced scorecard template, identifying two of the most relevant key performance indicators.
      1. Explain your rationale for the KPIs chosen, with an explanation of the cause-and-effect relationship between the chosen KPIs.
    4. Learning and Growth: Complete the customers/market section of the balanced scorecard template, identifying two of the most relevant key performance indicators.
      1. Explain your rationale for the KPIs chosen, with an explanation of the cause-and-effect relationship between the chosen KPIs.

Guidelines for Submission:

Submit two completed Excel spreadsheets using the provided template.

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 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

COMPANY B Three-Year Data

B_CO_FINANCE Learner Copy Rev 3/14/21
COMPANY B
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 2,910
Rent and Overhead 1,354 1,354 1,354
Depreciation and Amortization 2,814 2,806 2,776
Interest 2,700 1,800 1,800
Total Expenses 9,778 8,560 8,840
Earnings Before Tax 2,813 (669) 100
Taxes 788 (141) 21
Net Earnings 2,025 (529) 79
2017 2018 2019
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 90,000 80,000
Total Liabilities 91,560 91,009 80,995
Shareholders’ Equity
Equity Capital 33,685 33,685 33,685
Retained Earnings (929) (1,458) (1,379)
Shareholders’ Equity 32,756 32,227 32,306
Total Liabilities and Shareholders’ Equity 124,316 123,236 113,301
2017 2018 2019
Cash Flow Statement
Operating Cash Flow
Net Earnings 2,025 (529) 79
Plus: Depreciation and Amortization 2,814 2,806 2,776
Less: Changes in Working Capital (10,312) (592) 25
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 (2,706) (2,400) (2,800)
Financing Cash Flow
Issuance (repayment) of Debt (10,000)
Issuance (repayment) of Equity
Cash from Financing (10,000)
Net Increase (decrease) in Cash 12,445 469 (9,970)
Opening Cash Balance 70,000 82,445 82,914
Closing Cash Balance 82,445 82,914 72,944
Supporting Schedules
Working Capital Schedule
Accounts Receivable 1,380 1,297 1,336
Inventory 3,078 2,018 1,989
Accounts Payable 1,560 1,009 995
Net Working Capital (NWC) 2,898 2,306 2,331
Change in NWC (10,312) (592) 25
Depreciation Schedule
PPE Opening 37,521 37,413 37,007
Plus Capex 2,706 2,400 2,800
Less Depreciation 2,814 2,806 2,776
PPE Closing 37,413 37,007 37,032
Debt and Interest Schedule
Debt Opening 90,000 90,000 90,000
Issuance (repayment) (10,000)
Debt Closing 90,000 90,000 80,000
Interest Expense 2,700 1,800 1,800

COMPANY A Three-Year Data

A_CO_FIN Learner Copy Rev 6/19/21
COMPANY A
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 1,804 1,804
Depreciation and Amortization 2,814 2,806 2,806
Interest 900 900 900
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
2017 2018 2019
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 30,000 10,000
Total Liabilities 31,560 31,926 11,651
Shareholders’ Equity
Equity Capital 33,685 33,685 33,685
Retained Earnings 38,891 38,723 41,103
Shareholders’ Equity 72,576 72,408 74,788
Total Liabilities and Shareholders’ Equity 104,136 104,334 86,439
2017 2018 2019
Cash Flow Statement
Operating Cash Flow
Net Earnings 1,846 (170) 2,380
Plus: Depreciation and Amortization 2,814 2,806 2,806
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) (2,800)
Cash from Investing 2,706 (2,800) (2,800)
Financing Cash Flow
Issuance (repayment) of Debt (20,000)
Issuance (repayment) of Equity
Cash from Financing (20,000)
Net Increase (decrease) in Cash 17,678 (558) (17,389)
Opening Cash Balance 44,587 62,265 61,708
Closing Cash Balance 62,265 61,708 44,319
Supporting Schedules
Working Capital Schedule
Accounts Receivable 1,380 1,419 1,460
Inventory 3,078 3,799 3,257
Accounts Payable 1,560 1,926 1,651
Net Working Capital (NWC) 2,898 3,292 3,066
Change in NWC (10,312) 394 (226)
Depreciation Schedule
PPE Opening 37,521 37,413 37,407
Plus Capex 2,706 2,800 2,800
Less Depreciation 2,814 2,806 2,806
PPE Closing 37,413 37,407 37,402
Debt and Interest Schedule
Debt Opening 30,000 30,000 30,000
Issuance (repayment) (20,000)
Debt Closing 30,000 30,000 10,000
Interest Expense 900 900 900

Balanced Scorecard-Company A

BASIC BALANCED SCORECARD TEMPLATE 3
COMPANY NAME
ADDRESS [Insert text CITY STATE ZIP
Category STRATEGIC OBJECTIVES KEY PERFORMANCE INDICATORS TARGET VALUES KPI ACTION PLAN DETAILS STUDENTS KPI SELECTION RATIONALE
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 ths 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

BASIC BALANCED SCORECARD TEMPLATE 3
COMPANY NAME
ADDRESS [Insert text CITY STATE ZIP
Category STRATEGIC OBJECTIVES KEY PERFORMANCE INDICATORS KPI TARGET VALUES KPI ACTION PLAN DETAILS STUDENTS KPI SELECTION RATIONALE 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 ths 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