please analyze and answer the questions below $.$

TransGlobal

Confidential Internal Memo

Interviews With Company Leaders: Company A

The notes below are a summary of recent conversations with company leaders at Company A$.$ As much as possible, I have summarized these in a question$-$and$-$answer format. I tried to transcribe actual statements as they were made, but I was unable to capture every detail of each conversation.

As an introductory note, l$\text{'}$ll observe that smaller firms tend to be far less structured and less bureaucratic than TransGlobal. Sometimes, this translates into quicker and more flexible decision making. It also can result in some elements of good management falling through the cracks to some degree. Also, I'll note that my opportunities for discussions were quite limited$,$ so these notes are not comprehensive.

INTERVIEW #$1$: Vice President of Sales

Why do your customers come to your airline? Why do some customers choose other airlines? How do your customers make their buying decisions?

"Our customers are very often repeat customers; close to two$-$thirds of our sales each year go to individuals who have flown with us before. Plus, we have extraordinarily positive word$-$of$-$mouth advertising. This is supported by our Bring a Friend promotional program, which encourages customers to send us additional customers. This has been very popular. Just last year, we conducted a poll and learned that $75\%$ of our customers would recommend us to a friend or family member.

$$Also$,$ we provide our customers with some special features on our flights, and we don't charge for the first checked bag, either. Customers appreciate the feeling of going first class. We also add in little extras at times to provide our passengers with a sense of excitement and entertainment. This is generally done by flight staff and ground staff; they use little things like special treats or small toys for kids, things like that. A year ago, we overdid this a bit and added unnecessary expenses to our Cost of Goods Sold, but we've corrected that in the past $12$ months.

$"$We hold about $19\%$ of the overall regional market, though that is about three points down this year from prior years. A few of the bigger companies have started moving into regional specialty markets in the past $10$ years, cutting into our traffic. We're still competing well, though, especially because our fleet is built around the smaller volumes.

$"$As a contrast, our competitors usually emphasize low price, and we do lose some customers to them for that reason. A few of them have also started bundling services, for example, including hotel

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Confidential $-$ For Internal Distribution Only

arrangements, destination$-$specific restaurant dining packages, and golf and recreation options along with their flights. We've looked into this a bit, but our present IT systems aren't built for that sort of complexity; it would take a sizable investment to go in that direction. We could afford such an investment, but even so$,$ we're not sure it's justifiable."

NOTES: The VP of Sales also indicated that he would like to hire additional personnel and use a New York advertising firm to boost traffic in the off$-$season. He indicated some difficulty in selling this idea to others in the company; he seemed confident that he could boost overall gross revenue by $$1-2$ million with an investment of just $$100,000.$

INTERVIEW #$2$: Chief Financial Officer

How would you describe the company's financial picture? Are you optimistic about the future?

"We're coming off a great year. Our revenues hit an all$-$time high $($above $$29$ million$)$; year$-$over$-$year growth is favorable; and profit$-$wise, our latest net earnings are bouncing back nicely from the prior year. The prior year was a bummer in many ways $-$ we had some excess costs and a variety of issues with quality.

$"$On the other hand, some trends are worrisome. Our two largest costs are personnel and fuel $...$ and the third is our payments on capital equipment. With a fleet of $55$ aircraft, we've got a lot of maintenance, too. As a company, we're dedicated to safety first, but some of the more cosmetic and customer$-$friendly upgrades have been deferred over the years.

"It's been difficult to acquire new aircraft over the past $10$ years, so our fleet is now showing some age. There are some more advanced aircraft available, and we do have the available cash to build up our fleet. Despite the age of our aircraft, they're still fully safe, of course, but the luxury feel that we'd like to offer our customers isn't always apparent, if you know what I mean."

INTERVIEW #$3$: Chief Operating Officer

Tell me a bit about your operating processes. Where does your firm excel in delivering value? Where are there issues or process improvements needed? Do you use total quality management methods