Strategic Management Case Analysis Of Airtran Airways

strategical Management Case abbreviation Of Airtran AirwaysThis case analysis examines the impacts AirTran Airways has on the respiratory tract industry with respect to its competitors. AirTran Airways is an air duct association that provides domestic flights (U.S.) to break scratch offers move in the United States. AirTran too became the first airline to offer Wi-Fi to its travelers. AirTran is the successor of its predecessor ValuJet Airlines that was founded in 1993 in Atlanta, Georgia. AirTran, better known as ValuJet Airlines in the mid 1990s, grew economically stable be ride of its nestling airf atomic issue 18 prices. In 1995 and 1996 however, ValuJet as well obtained the lavishlyest subdue of air-travel accidents than any former(a) airline corpo balancen. One example was the famous crash of Flight 592 in 1996 that killed 110 people in Florida when the plane crashed into the Florida Everglades (river). After the accident and further investigation by the federal official Aviation Administration (FAA), the crash had resulted from several safety violations of ValuJet aircrafts. These violations in any case led the FAA to ground ValuJet Airlines. In set out words, any new aircrafts purchased by ValuJet had to be approved by the FAA to position the safety level and conformism to the FAA standards for aircrafts.In 1997, ValuJet was experiencing pecuniary hardships and was on the road to bankruptcy. As a result, ValuJet partnered with AirTran Holdings and move their trading trading operations from Atlanta, Georgia to Orlando, Florida. A ill-judged time after the merger of AirTran and ValuJet, ValuJet decided to remove its name from the merger, letting AirTran Holdings obtain operate of the entire merger. As of September 2010, AirTran Airways (AirTran Holdings) has experienced fiscal hardships since the 2008 world-wide recession. As a result, AirTran made an agreement for southwest Airlines to purchase the low-fare airline since AirTran was on the road again to bankruptcy. The information constructed and usaged for this case analysis pertains to proposed mess and mission didacticss for AirTran, inhering and external audits of AirTran, types of strategies, and a conclusion that get out determine what AirTrans next plan of operation should be.Vision StatementActualProposedAirTran has NO material vision statement.AirTrans vision is to be recognized and sire the leading competitor in the airline industry with affordable airfares, a safe environment, and excellent client service.Mission StatementActualProposedInnovative people dedicated to delivering the best flying experience to chic travelers. Every day. (AirTran, 2008).Our mission is to supply safety and affordable flights to our travelers including our employees in the airline industry. We are committed to creation honest and loyal to our travelers while providing a fun and safe environment for our crew members and our customers. We are nidus much on engine room including offering Wi-Fi satellite radio to our traveling customers. AirTran is also focused on teamwork and taking pride in everything we accomplish because communication among our crew members is the expose for success here at AirTran. watchword and Analysis of Mission/Vision StatementsIn judging the actual vision and mission statements of AirTran, the proposed statements keep a better insight on what AirTran is nigh. AirTrans vision does not react the question of what we want to become, because a vision statement for AirTran do not exist (David, 2011). Instead, a proposed vision was created in order to worry the void of a missing vision statement. The vision statement is the most important statement because it defines what the company plans to do and it is the foundation of defining the mission statement.AirTrans actual mission statement does not clearly answer what AirTran is about. For example, AirTrans current mission statement save states what the emplo yees goal is about, which is providing the best flying experience to smart travelers. It does not satisfy the mission statement components including customers, technology, concern for employees, or a philosophy the company can follow. The actual mission does not build a foundation for strategies, plans, and priorities for AirTran. In the proposed mission statement however, the mission overwhelms customers, the service AirTran offers, the food commercialises, technology and concern for employees. The proposed philosophy of AirTran is communication among our crew members is the key for success here at AirTran (David, 2011). parole and AnalysisAn EFE matrix is a tool that is used by companies to determine and study economic, demographic, political, technological, competitive, etc. parts distant of its company (David, 2011). The unemployment factor under opportunities received the highest weight because it unemployment increases, much people will drive vehicles and travel less by plane to save gas and coin. Currently, the unemployment rate is 9.2% in the US (U.S. Bureau of jade Statistics, 2010). If the unemployment rate decreases, more people are likely to travel by airplanes, especially if the airfare cost is low and demand for air travel is high (Travel Agent Central, 2010). An different major opportunity is that one of AirTran competitors Mexicana de Aviacin ceased operations in the United States and Mexico. The use of wireless technology and Wi-Fi is other opportunity that could attract voltage travelers who dont make access to the inter pull in when traveling on other Airline company planes.The largest threat to AirTran is the increase competition from Delta and souwest Airlines. The increased competition factor received the highest weight because the most important factor that affects another business is the competition from its competitors. Another threat to AirTran is that its highly dependent on the fluctuations of evoke be. Since fuel i s one of the largest costs to AirTran a sylphlike adjustment can mean the difference between a loss and a pelf. Along of fuel, apprehend costs are one of the largest costs to AirTran and a slight adjust can mean the difference between a loss and a profit.Political policies obligate by the US and other countries in which AirTran operates can have a huge impact on the company as a whole. With terrorism a top priority of the government, new policies can cause a huge burden on AirTran for new technologies or more labor costs (security and maintenance). As with any business, labor strikes can halt a companys operations causing the company to lose millions in tax income. Labor strikes received a rating of 4 because it is a threat that could cause AirTran to be drive out of business. AirTran is performing average in their external environment. Most of AirTrans opportunities and threats need to be addressed more aggressively, such(prenominal) as decreasing operating costs, expanding i nternationally, and increased competition (David, 2011).Competitive Profile matrix interchange and AnalysisA Competitive profile matrix for a business helps them determine major competitors failing and strengths in their strategies (David, 2011). AirTran has the highest weighted score because AirTran has an advantage in charter services, business class services, and the navigation of their website. establish on the research found, the lowest fare costs ranked from AirTran being the lowest to Southwest Airlines being the highest and Delta Airlines falling between the two. AirTran received a rating of 4 under technological advances because it was the first airline company to introduce and provide Wi-Fi to travelers and customers. AirTran however, received a rating of 2 for both the market address and the fiscal plant because AirTran is becoming bankrupt, in which AirTran was just bought out by Southwest Airlines. Airfare costs and market care are weighted heavily because if a com panys airfare costs are too high, many customers will reject the idea of buying airfare tickets. Charging too low for airfare tickets would attract more customers, but would decrease the market appearance at since the company would be losing profits while selling at a low price. reciprocation and AnalysisAn IFE Matrix is a tool that summarized the major strengths and weakness for many companies found on the useful areas of that business (David, 2011). Being the first airline company to provide Wi-Fi Inter loot to travelers is classified as minor strength because it provides an opportunity for travelers to surf the web or complete business target areas. AirTran also has a inaugural place ranking in overall air whole tone from the Airline Quality Report of 2008 (AirTran Airways, 2008). Having rewards for support flyers encourages their frequent flyers to be a committed customer. AirTran includes their $1 billion annual revenue, which helps their airline purchases better equip ped airplanes. Also, AirTrans high number of daily flights helps their revenue while increasing their safety rating from by ride passengers to their destination safely. Lastly, their low cost structure encourages more customers which will result in an increase of their profit revenue.Having customer complaints and a decrease in stock prices can result in negative effects. A weakness is a negative dodge of a business that has negative impacts upon that particular business (David, 2011). These are a few weaknesses that AirTran before long possess, which could cost them thousands of potential customers.. Another weakness of AirTran includes spending more money for maintenance equipments, which resulted in a profit loss, which can also affect the liquidity of the business. High labor costs also have a negative impact on AirTran because it decreases net income.Key monetary Ratios (in thousands) raillery and AnalysisThe pecuniary ratios in a higher place are based off the 2009 rest public opinion poll and income statement data from AirTrans annual report. fiscal ratios are statistical data that analysts use based on the companys fit sheet and income statement for that fiscal year (David, 2011). Liquidity ratios help measure a firms capacity of group meeting short-term obligations. Leverage ratios help determines how much a firm is in debt. practise ratios describe how come up a firm is allocating its resources effectively. Profitability ratios help determines the overall effectiveness of management based on the firms investments and sales. issue Ratios help determine the firms ability to remain liquid during the product of both the economy and the industry (David, 2011). schema AnalysisSWOT Strategy MatrixStrengthsFinancial stabilityGlobal presenceBrand creditLow cost air faresWeaknessesSpeed of customer serviceHigh rate of accidents involving AirTran planesQuality of airline servicesOpportunitiesPossible company expansion with Southwest Airlines.Possib le gain of new fleet subjoin in profitsExpanding AirTran into unconnected countries.SO StrategiesUtilize brand recognition by expanding operations and partnering with Southwest Airlines (S3, O1).Increase global presence by expanding operations into foreign countries such as Mexico, Canada, and the Middle eastern (S2, O4)WO StrategiesEliminate high percentage of airplane accidents by acquiring new fleet that uses efficient technology to decreases the risk of accidents (W2, O2). remediate the quality of airline and customer service with new methods such as customer surveys, questionnaires, and joining forces with their major competitor to improve quality (W3, O1)Threats1. Stronger Competition from competitors2. Rising Labor Costs3. Anti-terrorism policies and laws4. sparing conditionsST StrategiesSustain financial stability by monitoring expenses and changes with the competition (S1, T1)Maintain low air fares and supreme profits by monitoring the economic condition for the airline industry (S4, T4)Eliminate retrenchment by expanding operations globally (S2, T4)WT StrategiesEstablish a positive public image regarding the high rate of accidents to sub due criticism from people who are affected by post 9/11 laws and policies (W2, T3)Focus on improving customer services to help combat against other airline competitions customer service (W1, T1)Improve the quality of airline services by monitoring the competition that has a stronger competitive advantage (S3, T1)Discussion and AnalysisThe SWOT (Strengths-Weaknesses-Opportunities-Threats) matrix is an important type of framework used by companies to develop quatern types of strategies based on SO (strengths-opportunities), ST (strengths-threats), WO (weaknesses-opportunities), and WT (weaknesses-threats) (David, 2011). SO strategies are based upon the companys internal strengths, which are used to benefit upon the external opportunities outside that company. An SO dodging for AirTran would include using their brand recognition of low costs to expand their operations globally. ST strategies results from a companys strengths thats used to help eliminate or condense external threats. An ST dodge for AirTran would include monitoring their expenses and economic conditions to maintain financial stability. WO strategies are used to help capitalize on opportunities by improving the companys internal weaknesses. For example, AirTran has a high number of plane crashes, which is a major internal weakness. A WO strategy for AirTran would be to acquire new technology advanced fleet and aircrafts to eliminate the high number of airplane accidents. A WT strategy is used to help a company not only avoid external threats, but to help improve internal weaknesses also. A WT strategy for AirTran may include focusing on better customer service to gain potential customers from its competition (David, 2011).The SPACE Matrix for AirTran AirwaysINTERNAL STRATEGIC POSITION EXTERNAL STRATEGIC POSITIONFinancial se at (FP) Stability Position (SP)Technological changesRate of InflationCompetitive pressurePrice elasticity of demandPrice swan of competing productsFinancial Leverage LiquidityInventory TurnoverReturn on investmentCash Flows meshing per shareCompetitive Position (CP) Industry Position (IP)Growth potentialProfit PotentialFinancial StabilityResource UtilizationEase of entry into marketMarket shareProduct qualityProduct life cycleCustomer loyaltyTechnological know-howDiscussion and AnalysisA post matrix is a type of framework that companies use to designate which type of strategies should be pursued, whether those strategies are aggressive, competitive, defensive, or conservative (David, 2011). An aggressive strategy demonstrates that a company has great financial strength in that particular proposition industry for that company while a conservative strategy indicates that the status of a company (positive or negative) in a industry thats decreasing in growth and sales. A competitive strategy demonstrates that a company has major competitive advantage(s) in either a high-growing or low-growing industry. Companies categorized under a defensive strategy indicate that a company has competitive disadvantages in a low-growing industry. AirTran is currently taking a defensive position in the airline industry because AirTran has a weak competitive position in an industry thats becoming more unstable as time progresses (David, 2011). The value assigned to the financial position is a 2 because of AirTrans financial struggle to remain liquid as a business. AirTran received a -6 under the stability position since competitive pressure is high and the high risk knotty for AirTran. The Industry position received a score of 4 because AirTran has the potential to grow, but at the equal time, the financial stability of AirTran is relatively weak. The competitive position received a -5 because of the low market share and prevail AirTran has over its competition (David, 2011).T he Internal-External MatrixDiscussion and AnalysisAn Internal-External Matrix is a tool that companies use by dividing their divisions into nine cells and basing the data from the IFE and EFE weighted scores (David, 2011). The grow and build section received a medium score because the EFE weighted score for AirTran fell virtually 2.68. Since it has a medium score of 2.68, it would also be classified as an average internal position. The IFE weighted score for AirTran fell almost 2.70, which is also classified as an average internal position with a medium score (David, 2011). Since AirTran is struggling financially, the collect and divest area received an average score also with the grow and build section being in the low quadrant score.The Grand Strategy MatrixDiscussion and AnalysisA gallant strategy matrix is a tool that analysts use in order to formulate alternative strategies for that business. at that place are four quadrants that represents whether a firm is classified in a competitive or market position based on the growth of the market (David, 2011). AirTran would be classified under quadrant third because the airline industry has slowed in growth and AirTran is on the verge of bankruptcy. AirTran needs to make changes quickly however, due to the lack of financial support, Southwest Airlines has bought AirTran Airways from the owner of the company. Since all the other options have failed for AirTran, selling its business to another competitor is the only way to suppress bankruptcy (Schlangenstein, 2010).QPSM for AirTranThe Quantitative Strategic Planning Matrix QSPMStrategic Alternatives For AirTran AirwaysDiscussion and AnalysisThe QSPM (Quantitative Strategic Planning Matrix) is a type of framework thats used by companies to determine the comparative attractiveness of alternative strategies (David, 2011). These new strategies are based upon the previous strategies formulated from the SWOT matrix. The key factors of the QSPM are generated from t he EFE, IFE, and the competitive profile matrix strategies.The alternative strategies formulated are based on what the company should consider implementing. In other words, AirTran decides to use product development as an alternative strategy. The alternative strategy involved intends to increase sales by creating an express lane for customers to quickly purchase airfare tickets. Some of the key factors involved for the new express lane strategy include an increase in Floridas population, while perusing the weakness of increased customer complaints. An attractiveness score is formulated based upon how well the alternative strategy can improve the key factors, whether its an opportunity, threat, strength, or weakness. For the express lane alternative strategy, an attractiveness score of 2 for the increased population of Florida factor indicates that the idea is somewhat attractive. On the other hand, one of AirTrans competitors Mexicana de Aviacin ceased operations and received an a ttractiveness score of 4 because AirTran can capitalize on this opportunity by gaining more potential customers (David, 2011).Evaluation of AirTran worth analysisAirTran worthy Analysis **In Thousands (2009)1. Determine Net Worth or Stockholders Equity Sum of Common Stock, Additional Paid-in Capital, and Retained Earnings (in thousands)Discussion and AnalysisIn evaluating AirTrans worth, the worth can be categories into what AirTran owns, what AirTran has earned, and what AirTran can bring to the airline industry. The net worth of AirTran is approximately $525,740 (in thousands). The net worth includes common stock, paid-in capital, and AirTrans retained compensation (David, 2011). The price-earnings ratio for AirTran is a (-$525.81 thousand), which is a negative earnings per share because of AirTrans low stock prices. The current enterprise value of AirTran, according to yahoo.com is around 1.60 billion dollars. In other words, if Southwest Airlines decides to buy AirTran as Sout hwest have already done, Southwest would more than likely give in around 1.60 billion dollars (AirTran Holdings, 2009).RecommendationsSpecific strategies and long term objectives that would benefit AirTran would include expanding its operations internationally to countries such as Europe, Asia, and Africa due to the high population, especially China. Chinas economy is currently on the rise and AirTran moving its operations to China could greatly benefit the company. With nearly 1 billion people in China, if only 10% of the people buy airfares from AirTran at $50 each, thats 100 million people per $50 ticket, which would equal to around $5 billion, 5 times the annual revenue. Moving from a domestically controlled environment to an international control environment is beneficial also because it will provide the US citizens an inexpensive opportunity to travel to foreign counties. The estimated time for expanding AirTrans operations should take no more than 1 year, if not before. New policies that should be use for AirTrans foreign operations would include outsourcing employees such as the employees that live in the country thats holding AirTrans operations. For example, if AirTran expands to China, and then it is only logical that AirTran should only hire individuals from China and neighboring areas to run the operations. If AirTran however continues to experience financial instability, AirTran should sell all of its assets for their intangible worth, which would be classified as liquidation (David, 2011).Discussion and AnalysisA intercommunicate income statement allows an organization to predicted expected results based on particular actions and approaches (David, 2011). Based on the above income statement, it is communicate that AirTran will decrease in tot revenue by about 50% because of the juvenile drop in sales and net income. Since AirTran also has negative retained earnings, it is only reasonable that the total revenue will decrease by a percentag e. Since total revenue directly affects rude profit, the gross profit is projected to fall about 75% in the year 2010, based off 2009 financial data. Operating expenses are predicted to increase by 10% because of the decrease in profits and possible increase in expenses. Based off the projections, it is projected that the net income will also decrease by about 50% because of the decrease in revenues and gross profit.Discussion and AnalysisA projected balance sheet is a financial statement that allows an organization to predict future total assets and project total liabilities based off the income statement (David, 2011). Since the revenue decreased on the income statement, the cash of the balance sheet would decrease around 9% since cash is created from total revenues. Inventory will decrease by 8% because AirTran will not buy as many aircrafts for their airline company due to the recent drop in net income and increased expenses. As a result, the total assets would decrease by 9.8 percent due to the decrease of inventory, cash, and other contra-asset accounts. The liabilities are project to remain about the same with exception to the long term debt. Since AirTran is losing money, they are not likely to purchase any new aircrafts that may require them to take out a loan. The long debt account is projected to decrease by 25% because of the decreased reliability of taking out a loan for inventory purchases. Common stock under owners equity will remain the same since the number of shares outstanding will not change from its previous value of 135,000. Since the retained earnings are currently at a negative value, a prediction of an addition of negative $6,000 is projected for the retained earnings account. In addition, the total assets and total liabilities/stockholders equity match, so the projected balance sheet is complete for 2010 (David, 2011).Discussion and AnalysisThe financial ratios above are based off the 2010 projected balance sheet and projected incom e statement data for AirTran. Financial ratios are statistical data that analysts use based on the companys balance sheet and income statement for that fiscal year (David, 2011). The liquidity ratios for AirTran describe how well AirTran can meet short term liabilities. Both the current and quick ratios have a calculation of 1.02 based off the projected financial statements. The leverage ratios, which measure how much a firm is financial by debt include debt to total-asset ratio and debt to equity ratio. The debt to total-asset ratio has a calculation of 0.78, which indicates that AirTrans total assets is about 22% higher than AirTrans total debt. Activity ratios demonstrate how well AirTran is using its resources. The fixed assets turnover has a ratio of 1.00 exactly, indicating that AirTran is effectively using its resources and equipment utilization. The profitability ratios will measure AirTrans overall effectiveness based on sales and investments. The net profit permissivenes s has a ratio of 6% indicating that after taxes, per dollar of sales, AirTran will receive a 6% profit. The growth ratios measure how well AirTran can growth depending on its economic positioning. Based on the net income data, net income has a ratio of about 50% because of the increase of net income from $67,331 to $134,662 in 2008 and 2009 respectfully.Discussion and AnalysisA balance scorecard is a type of framework that companies use for evaluation of objectives such as financial performance and customer knowledge (David, 2011). The expected financial and nonfinancial objectives recommended for AirTran include customer service/loyalty, revenue growth, and quality of customer service. The desire measure for the customer objectives include customer feedback and rewards such as broad customers questionnaires to answer and provide an A+ reward to frequent travelers. The time expected to implement the customer objective will take around 1 month to complete. The desired measure for t he financial objectives includes the changes in finances such as net income and stockholders equity. The estimated time to implement the financial objectives may take up to 6 months or a year because of the financial instability AirTran is currently experiencing. The operations/processes objective has a desired measure of a scale rating from A to F. The higher the letter grade, the better AirTran will look to potential customers, creditors, and investors (David, 2011).ConclusionAirTrans future plan is to sell its company to Southwest Airlines instead of shutting down its operations. Although AirTran will no longer be operated as AirTran Holdings, the owner feels that this is an opportunity for AirTran to become an even greater entity. AirTran could have possibly rethought the situation of selling its assets to Southwest Airlines and formed an alternative strategy. The alternative strategy could have been to expand its operations to foreign countries that will create opportunities to reach a new variety and number of people. However, it appears now that Southwest Airlines is back to the top as being one of the most dominant airline companies to exist today.