http://www.imanet.org/docs/default-source/scholarships_rewards/2011-student-case
ID: 454051 • Letter: H
Question
http://www.imanet.org/docs/default-source/scholarships_rewards/2011-student-case.pdf?sfvrsn=2
PLEASE read this link above and HELP me to solve this problem, I need your opinion about this. (will gie full credit for a long answer) THANK YOU:
Strategy recommendation (this must be written in Standard English in full sentences). The strategy recommendation should be clearly stated, and supported by your analyses in your SWOT analysis, and other information in the case. You should consider addressing issues related to the aircraft fleet, markets and pricing, customer service, staffing, operations (i.e. gates, hubs, flights), and national politics.
Explanation / Answer
TransGlobal Airlines is up for election in three months and we were asked to analyze the profitability of each of the three market segments for the company. The best time to adopt a survival strategy is now, especially when things are going well. The current president has been in reign for the past forty years and had tight controls over all aspects of the economy. Because TransGlobal is a government-owned airline of a small republic, the presidential spot and its legislature are up for election in this democratic economy.
TransGlobal Airlines has a monopoly over the area. Because of this, the company hadn’t given much attention to the quality of service it has been providing over the past forty years. However, there are three candidates in the election, and each of them have committed to opening the market to competition if elected.
aircraft operating costs were allocated by number of passenger-miles-flown in each market. In the new income statement, they allocated based on amount of fuel each market segment used and how much each aircraft type (jumbo jet, medium jet, turboprops) depreciate annually. They allocated flight personnel costs based on the total cost of each market segment for both the pilot crew and the cabin crew. The ground costs were allocated appropriately as well. For gate rental expenses, they were allocated to each market segment by which gates each segment uses.
SWOT Analysis
Strengths
TransGlobal Airlines is excellent in terms of safety. If there is any indication of equipment malfunctions, they will cancel or delay the flight to ensure complete safety of their passengers. To date, there have only been minor accidents, with no fatalities. Our safety record should be a signal to customers that they should feel safe to trust us and fly with us in the future. A second strength is that this airline operates its international flights at near capacity. By operating near full-capacity, this allows revenue to be high to cover as much of their costs as possible, and potentially earn a profit.
Weaknesses
TransGlobal Airlines owns its own aircrafts, but the government only bought new airplanes during times when they had the funds to buy them outright, which means that some of the airplanes are quite old and will need to be replaced soon. Continuing on with that, parts of this company are quite old and basic infrastructures are in need of repair. Our country’s roads are in poor condition so our customers try to avoid inter-city road travel if they can.
Opportunities
TransGlobal Airlines has opportunities for further growth and profitability in the sense that this airline has brand recognition because it has been in operation for the past forty years. And currently, we are the only national airline provider because of lack of competition. There is also an increasing demand for air travel. With this, comes the opportunity to attract local customers on international flights, in which other countries impose a surcharge on payments made in krevna. This gives us a slight competitive advantage.
Threats
The presidential candidates have no working background in this competitive market so when they are elected, they will be starting from scratch. There are private investors who control the company. Opening up the economy to competition is seen as a must for the country’s financial recovery, which will give TransGlobal Airlines a lead to success. Privatization means loss of monopoly status, and change in ownership structure will limit the chances of getting financial support or a bailout, if needed, by the government.
Suggested Strategies
TransGlobal Airlines refuses to raise the price for regional city routes, They should consider to drop the market segment. TransGlobal Airlines may lobby to convince the new government/legislature to lift the obligation to serve regional routes that may be unprofitable, unless the fixed costs are absorbed by this segment as a whole or individually outweighs the losses from continuing to serve these routes. The decision should be based on a drop versus retain analysis using relevant costs and revenues.
They would able to pinpoint what it is that would make customers happier with the services we are providing. They may want to try to offer their customers a beverage selection in order to try to keep our current customers from switching to our competitors. This will buy us some time to gradually increase the basic services we can provide, such as entertainment systems.
A group of young managers has banded together to undertake an analysis of the current situation and recommend a post-privatization strategy. Using data gathered by the group, students are asked to prepare an analysis of market segment profitability. In addition they are asked to estimate the breakeven passenger volume for one of its routes.
They will be able to create an organization that is more efficient and profitable than the sum of the individual components. By combining both management and transportation infrastructure in one organization, TransGlobal will be able through its acquisition strategy to vertically and horizontally integrate the necessary services required for the movement of people and cargo throughout the region.
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