Scenario You are a former Navy officer and fighter pilot who is now the controller of a division o

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 divisions 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 componentsfinancial, internal processes, customers/market, and learning and growththat 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:

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.
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: 1250 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: $2829 million
Annual growth YoY: 2.52.9%
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

COMPANY NAME

ADDRESS

[Insert text

CITY

STATE

ZIP

Balanced Scorecard-Company B