Introduction and Project Requirements

1. Business Risk Analysis Project Report for the company Flight Centre travel group in a group of 4 or 5 members.

2. If you have difficulties forming such groups, please contact your lecturer as soon as possible.

3. Get approval of the company/client (Any company listed with ASX and not taken by other group) from your lecturer, on which your group want to progressively analyze.

4. The project focuses on the following categories of information related the understanding the entity and its environment: ? Nature of the entity ? Industry, Regulatory, and External Factors ? Objectives Strategies, and Business Risks ? Entity Performance Measures and Monitoring ? Management ? Governance Detail project tasks

Three Thousand words minimum

HOLMES INSTITUTE FACULTY OF HIGHER EDUCATION HOLMES INSTITUTE FACULTY OF HIGHER EDUCATION Group Assignment HA3032 Auditing TRIMESTER 2 / 2017 Instructions: 1. This assignment is to be submitted in accordance with assessment policy stated in the Subject Outline and Student Handbook. 2. It is the responsibility of the student who is submitting the work, to ensure that the work is in fact her/his own work. Incorporating another's work or ideas into one's own work without appropriate acknowledgement is an academic offence. Students can submit all assignments for plagiarism checking (self-check) on Blackboard before final submission in the subject. For further details, please refer to the Subject Outline and Student Handbook. 3. Maximum marks available: 20 marks. 4. Due date of submission: Week 11 5. Assignment should be of 3,000 words. Please use \"word count\" and include in report. Important Note: Please submit Assignment through SafeAssign 1|P a g e HA30 32 Gr oup Assig nment T2 2 01 7 Format of the Report 1. You at least should have the following details: a. Assignment Cover page clearly stating your members name and student number s b. A table of contents, executive summary c. A brief introduction or overview of what the report is about. d. Body of the report with sections to answer the above sections and with appropriate section headings e. Conclusion f. List of references. 2. Diagrams and tables clearly labelled and explained. 3. Ensure all materials are correctly referenced. Plagiarism will be severely penalised. Group Assignment theme: Identifying and Assessing the Risks of Material Misstatement through Understanding the Entity and Its Environment The objective of this project is to provide you with an opportunity to assess the business risks and perform analytical procedures for a real world company. Introduction and Project Requirements 1. Prepare a Business Risk Analysis Project Report [Minimum of 3000 words] for the client/company in a group of 4 or 5 members. 2. If you have difficulties forming such groups, please contact your lecturer as soon as possible. 3. Get approval of the company/client (Any company listed with ASX and not taken by other group) from your lecturer, on which your group want to progressively analyze 2|P a g e HA30 32 Gr oup Assig nment T2 2 01 7 4. The project focuses on the following categories of information related the understanding the entity and its environment: Nature of the entity Industry, Regulatory, and External Factors Objectives Strategies, and Business Risks Entity Performance Measures and Monitoring Management Governance Detail project tasks: Part 1 - Understanding Nature of the entity Matters that you may consider when obtaining an understanding of the nature of the entity include: Business operations Investments and investment activities Financing and financing activities Financial reporting practices Part 2 - Understanding the Industry a) b) c) d) e) f) g) Industry size Industry growth Industry supply chain Major players Market shares of Industry players Critical success factors Major threats Part 3 - Understanding the legal environment Relevant regulatory factors include the regulatory environment. The regulatory environment encompasses, among other matters, the applicable financial reporting framework and the legal and political environment. 3|P a g e HA30 32 Gr oup Assig nment T2 2 01 7 Part 4 - Understanding external environmental factors a) b) c) d) PEST analysis SWOT analysis Porter's five forces analysis other external factors affecting the entity that you may consider include the general economic conditions, interest rates and availability of financing, and inflation or currency revaluation. Part 5 - Understand objectives, strategies and Assessing Business Risks a) Industry developments (a potential related business risk might be, for example, that the entity does not have the personnel or expertise to deal with the changes in the industry). b) New products and services (a potential related business risk might be, for example, that there is increased product liability). c) Expansion of the business (a potential related business risk might be, for example, that the demand has not been accurately estimated). d) New accounting requirements (a potential related business risk might be, for example, incomplete or improper implementation, or increased costs). e) Regulatory requirements (a potential related business risk might be, for example, that there is increased legal exposure). f) Current and prospective financing requirements (a potential related business risk might be, for example, the loss of financing due to the entity's inability to meet requirements). g) Use of IT (a potential related business risk might be, for example, that systems and processes are incompatible). h) The effects of implementing a strategy, particularly any effects that will lead to new accounting requirements (a potential related business risk might be, for example, incomplete or improper implementation). Part 6 - Performing Analytical Procedures to understand Entity's Performance You are also required to perform analytical procedures (ratio analysis) on the selected company for 3 years and compare those ratios across time, and to industry data or a major competitor. 4|P a g e HA30 32 Gr oup Assig nment T2 2 01 7 Part 7 - Understand management and Governance a) Communication and enforcement of integrity and ethical values - These are essential elements that influence the effectiveness of the design, administration and monitoring of controls. b) Commitment to competence - Matters such as management's consideration of the competence levels for particular jobs and how those levels translate into requisite skills and knowledge. c) Participation by those charged with governance - Attributes of those charged with governance such as: Their independence from management. Their experience and stature. The extent of their involvement and the information they receive, and the scrutiny of activities. The appropriateness of their actions, including the degree to which difficult questions are raised and pursued with management, and their interaction with internal and external auditors. d) Management's philosophy and operating style - Characteristics such as management's: Approach to taking and managing business risks. Attitudes and actions toward financial reporting. Attitudes toward information processing and accounting functions and personnel. e) Organisational structure - The framework within which an entity's activities for achieving its objectives are planned, executed, controlled, and reviewed. f) Assignment of authority and responsibility - Matters such as how authority and responsibility for operating activities are assigned and how reporting relationships and authorisation hierarchies are established. g) Human resource policies and practices - Policies and practices that relate to, for example, recruitment, orientation, training, evaluation, counselling, promotion, compensation, and remedial actions. . 5|P a g e HA30 32 Gr oup Assig nment T2 2 01 7 Running head: FLIGHT CENTER TRAVEL GROUP COMPANY ANALYSIS Flight Center Travel Group Company Analysis Student's Name Course Date Tutor 1 FLIGHT CENTER TRAVEL GROUP COMPANY ANALYSIS 2 Flight Center Travel Group Company Analysis 1.0 Executive Summary Flight Center Travel Group commonly known as FCTG is one of the largest retail air travel outlet in Australia. The company was founded about 35 years ago in the year 1982. It is currently headquartered in Brisbane, Queensland, Australia and it serves various areas including Australia, New Zealand, Canada, UK, USA, South Africa, Singapore, Hong Kong, China and India among other international destinations. This company is considered to be one of the most successful air travel business story because of its average annual revenues, number of employees in its subsidiaries worldwide and the number of shops and business operated nu the company. According to the company's financial reports for the financial year 2016, the company has annual turnover of $20 billion, had employs of over 20,000 and runs over 2,800 stores and business under retail and corporate brands across the global air travel industry (Benckendorff, Sheldon & Fesenmaier, 2014). The company was co-founded by Graham Turner and Geoff Harris who are in the top management of the company to date. This project would assess the company's risks and also perform an extensive analytical procedures on the company in the industry. 2.0 Nature of the Entity 2.1 Business Operations The FCTG is a retail outlet operating in both Australia and other international destinations listed in the executive summary. The company operates various airline services, shops and business providing various services such as tour services under various retail as well as corporate brands. It is reported that the company has over 2,800 shops selling different types of consumer products FLIGHT CENTER TRAVEL GROUP COMPANY ANALYSIS 3 across the global market. It's fully operational in countries in Australia, New Zealand, United Kingdom, China, United States, Hong Kong, South Africa, United States, United Arab Emirates, Singapore and India among others. The company is licensed to operate in further 80 countries spread across the glove under corporate brand; FCM Travel Solutions. In the United States, the company deals in various popular retail and corporate brands such as GOGO Vacations Liberty Travel, Worldwide Traveler and StudentUniverse among others. The company therefore majorly deals in the travel and tour industry and also provides the consumer products needed during such travels such as hotel, catering and accommodation among others. 2.2 Investments and Investment Activities The company has invested in various sectors in the travel industry. The company as discussed in the previous section has invested in over 2,800 stores retailing its products and services across the global market. Secondly, the company has also invested in the airline, road, and water travel across the world. It owns major travel agencies in the UK, Cana and United States which deals majorly in the travel and tour services offered by the company (Panosso, 2016). Besides these, the company has also invested in other sectors of the economy including the hotel industry, real estate, fashion and education among others. These investments help in boosting the nonoperating revenues of the company. 2.3 Financing and Financing Activities Financing is the most critical aspect of the company's operations. FCTG requires huge amounts of funds to fund its global operations. The company therefore explores the various financing options that are available to raise the required finances to fund its immediate and future financial obligations. In the company's 2017 financial reports, the company reported to have raised its FLIGHT CENTER TRAVEL GROUP COMPANY ANALYSIS 4 capital from debt financing, equity financing as well as retained earnings. The company has a long-term loan of about $132 million, common stock of $403 million, retained earnings of $1 billion and treasury stock of about $11 million. The company's capital structure was majorly depended on equity financing through retained earnings because of the numerous investments that the company invested in besides its core business. 2.4 Financial Reporting Practices The company strictly follows the GAAP standards of reporting where it reports its financial statements every financial year. During reporting, the company discloses all the relevant financial information to the public in its end of year financial statements. The company also makes the SEC filings with the relevant authorities to allow scrutiny of its financial statements for tax and other regulatory purposes. 3.0 industry 3.1 Industry Size The FCTG can be categorized in the service industry owing to the type of products and services the company deals in. This is huge industry since it has numerous players offering different kinds of products and services to its customers. The industry has operations cutting across various players including retailers, travel agencies, and hotel and accommodation services industry. 3.2 Industry Growth The industry growth is very high since the service industry comprises of players that have been noted to be growing their revenues at a very high rate. FTCG for instance has recorded a constant growth of about 8% in its growth for the last five years. This growth is also reflected in the FLIGHT CENTER TRAVEL GROUP COMPANY ANALYSIS 5 industry where the industry growth is estimated to growth at a rate of 6%. This growth is expected to double in the next few years because of the introduction of technology in the operations of most players in the service industry. Most players are incorporating modern technology in their value chain which serves to improve efficiency, customer service delivery and lower operational costs resulting to a major growth in the industry. 3.3 Industry Supply Chains The industry supply chain comprise of airlines, accommodation, hotel and other tour services. Travelers from across the world would book with any player in the industry to have a trip in any part of the world. The players in the industry would process the bookings, have the traveler on a flight to his or her destinations where the companies would provide for hotel, accommodation and tour services through his or her trip. These elements therefore forms the supply chain of the travel and tour players in the industry. 3.4 Major Players Some of the major players in the global travel industry include Priceline Group with a net turnover of $39.2 billion, American Express Global Business Travel with a turnover of $30.3 billion, Carlson Wagnolit Travel with a turnover of 26.9 billion and BCD Travel with a turnover of $26.9 billion. 3.5 Market Shares of Industry Players The player have different market shares depended on their capacity and assets base. Priceline has the highest market share controlling about 35% of the global air travel market, followed by American Express with about 25%, Carlson with 15%, BCD with 8% and lastly, FTCG which controls about 7%. FLIGHT CENTER TRAVEL GROUP COMPANY ANALYSIS 6 3.6 Critical Success Factors The major critical factors that determine the success of the companies include the following. First, safety and security measures taken by the companies. There have been reported various accidents in air travel in the recent years leading to drastic loss of lives and property. A traveler will therefore choose an airline that assures him or her security and safety throughout the journey. Secondly, the quality of customer services offered would also determine the customer satisfaction and by extension the success of the company. Other factors include the cost of travel, stop points and the convenience of the airline especially for corporate and business customers. 3.7 Major Threats The major threat facing most airlines is the security threat which lead to massive loss of lives. In the past one decade, a couple of air planes have been reported to either disappear from the radar or being shot by missiles and no services have been rescued. This therefore creates a major threat since travelers will opt not to travel because they are afraid of the security threats they will be exposed to when they travel. Secondly, the modern improvements in technology has made communication more easier and swift making some business people not travel and this lowers the income generated by the airlines. 4.0 The Legal Environment Airlines are guided by strict legal requirements based on the countries where they are hosted, travel to or pass. Some countries have for instance been sanctioned by the United States and the UK and therefore, airlines from such countries are not allowed to land in the said countries. Secondly, different countries have strict laws governing air travel and the airlines are expected to company in order to continue operating in this countries. FLIGHT CENTER TRAVEL GROUP COMPANY ANALYSIS 7 5.0 External Environmental Factors 5.1 PEST Analysis FCTG operates in various countries whose political environment is considered to be relatively stable. Australia for instance is a very politically stable country and this boosts travels in and outside the country. Its neighboring countries such as New Zealand is also politically stable boosting and supporting the travel business in Australia. The success of FCTG in travel business can therefore be partly attributed to its stable political environment. The economic environment of Australia and the other countries where the company operates is also relatively stable and improving. The economy of Australia has registered a major growth after the 2007 global financial crisis that affected almost all the big economies in the world. However, Australia has shown a significant improvement in its economy in the last one decade and this has impacted the travel business positively. The social environment of the country is also improving where the rate of unemployment in Australia has considerably decreased. This therefore implies that most Australians are now willing and able to go for trips abroad and also allow visitors to travel into their country as tourists. Lastly, the massive improvement in modern technology has also positively impacted the business since the air travel services can now be accessed by consumers across the global market. 5.2 SWOT Analysis A thorough analysis of the company and its environment also reveals various strengths and weaknesses internally and opportunities and threats externally. To begin with strengths, the company has a very stable asset base since it has invested massively in other sectors of the economy to diversify its operations. This makes the company stable despite some to of the FLIGHT CENTER TRAVEL GROUP COMPANY ANALYSIS 8 challenges facing the air travel industry in the recent years. However, the major weakness of the company is that it leases most of its airlines which makes its rather costly to run. The opportunities in the market exist in the sense that there has been an increasing number of travelers in the recent years both from Australia and internationally. The company can therefore tap into this market to raise higher revenues. However, the major threat that the company faces is competition from other established players. Given the current competition for business, most established players in the industry are offering very competitive rates that would make it unprofitable for the FTCG to adequately compete with them threating its survival in the industry. 5.3 Porter's Five Forces Analysis This analysis will focus on the competition in the industry, potential of new entrants, power of suppliers and customers, and threat of substitute products or services. To begin with competition, FTCG faces stiff competition from other established players in the global airline industry. There are various established players who are market leaders in the industry and therefore control a huge market share of the industry. FCTG will therefore find it difficult to compete with such players in the global industry since they are market leaders and already have a sizeable share of the market. Secondly, the air travel industry has little or no threats to entry since it requires large amount of initial capital to enter into the industry. It would not be easy therefore for other players to enter into the already saturated industry. Thirdly, they is a higher power of suppliers of the airlines and other products or services in the industry since these are big players. There is limited power of customers since they cannot control the pricing of the products or services industry. Price and quantity is normally determined by the forces of demand and supply. There are also numerous substitute product or services in the industry creating a major problem for the players. FLIGHT CENTER TRAVEL GROUP COMPANY ANALYSIS 9 Technology for instance can be used instead of someone having to travel. There are also other forms of travelling which include water, road and train travel. 5.4 Other External factors The other external factors that have an impact on the air travel industry both locally and globally include the safety and security factors involved in air transport. The recent wake of security concerns on issues related to air accidents, terrorism and unfavorable weather conditions has had a significant negative impact on air travel both locally and internationally. 6.0 Objective, Strategies and Assessing Business Risks 6.1 Industry Developments The recent challenges in the air travel industry has led to various developments to boost the confidence of customers on issues related to their safety and security during air travelling. Some of the developments include increased use of technology to boost the safety of the travelers, introduction of direct flights and change of air routes in areas that are considered more insecure (Ketchen, Snow, & Hoover, 2004). 6.2 New Products and Services There has been introduction of other products and services so as to encourage travelling and also help in diversification of the product line for the air lines. Most air travel companies are considering other products and services such as hotel and accommodation, other forms of traveling such as water, road and train and touring services to boost their profits. 6.3 Expansion of the Business FLIGHT CENTER TRAVEL GROUP COMPANY ANALYSIS 10 The introduction of new products and services for most players in the air travel industry has resulted in the expansion of business (BRW, 981). FCTG for instance currently operates numerous business ventures in various location across the country most of them offering services that are either different or compliment the air travel business. 6.4 New Accounting Requirements The new accounting requirement that focuses on the air travel business include the expected change in accounting lease standard from the current IFRS 17 to IFRS 16. The new accounting standard would impact the treatment of leased assets which are very common with air travel business. In the new standard which would be implemented in January 2019, leased assets would be treated as liabilities to the lessee. This would therefore increase the liability of the company on its financial statements. 6.5 Regulatory Requirements The increased risks on the safety factors in air travel has resulted to most countries putting in place strict regulations to protect the safety of the travelers. Air planes flying to the United States for instance are prohibited from flying in some countries such as the Middle East which make the prone to attacks by missiles (Shappell & Wiegmann, 2012). This is meant to protect the safety of the travelers traveling to or from the United States. 6.6 Current and Prospective Financing Requirements The current and prospective financing requirements of FCTG has significantly increased because of the numerous products line offered by the company. Unlike in the past, the company has expanded to global markets and is currently offering a wide range of products. It therefore, requires higher amount of funding both currently and in the future to finance its operations. FLIGHT CENTER TRAVEL GROUP COMPANY ANALYSIS 11 6.7 Use of IT FCTG has incorporated the use of IT in its operations to boosts its efficiency in customer service delivery and also lower the cost of operations. Technology is one critical factor in bettering the quality of services offered by a company. Amidst the stiff competition in the air travel industry, FCTG cannot compete effectively if it fails to leverage the advantages of technology in its operations (Doganis, 2006). This has therefore motivated the company's management to incorporate technology in majority of its operations in the recent past. 6.8 Effects of Strategy Implementation The company has implemented various strategies including diversifying its product line, expanding into new markets and incorporating technology in its value chain. This strategy implementation has impacted the company in various positive ways. First, the company has boosted its survival in the industry despite the stiff competition from other established players. Secondly, the strategies have also improved the profitability of the company and lastly, technology has helped in improving the quality of services offered and lowering the operational cost of the company making it more competitive in the industry. 7.0 Performing Entity Analysis There are numerous challenges in the air travel industry as discussed in the previous sections. However, FCTG has continued to consistently improve in its performance because of the strategies it has implemented in its value chain. First, the company has now expanded in over 23 countries across the globe which makes its very competitive in the industry (BRW, 981). Secondly, the company is currently offering a wide range of products and services boosting its FLIGHT CENTER TRAVEL GROUP COMPANY ANALYSIS 12 survival in the market. Lastly, introduction of technology in its value chain has also helped the company to remain competitive and profitable in the industry. 8.0 Management and Governance 8.1 Communication and Enforcement of Integrity and Ethical Values Communication is very critical to the success of any company. In FCTG, the company's management encourages communication at all levels to ensure the smooth running of operations. The company's management also enforces integrity and ethical values among the employees and in their interaction with the customers to create a good impression which is important in creating a good image for the company. 8.2 Commitment to Competence The company's goal is also committed to competence where the company promises to serve the needs of their clients with the highest levels of competency possible (Pease, Rowe & Cooper, 2007). This is important in ensuring the satisfaction of their customers which boosts customer loyalty. 8.3 Participation by those Charged with Governance The managers are required to actively participate in the active governance of the company. Managers are required to take responsibility of their teams and ensure that they all perform their duties and responsibilities to satisfy their customers. 8.4 Management Philosophy and Operating Style FLIGHT CENTER TRAVEL GROUP COMPANY ANALYSIS 13 The company's management philosophy and operating style is focused on the client. The company's management ensures that its employees puts all the measures in place to ensure that their customers are satisfied with the type of services or products offered. 8.5 Organizational Structure The organization has an elaborate structure with a definite chain of command consisting of the top, middle and lower management. The top management is charged with setting strategies which are implemented by the middle management and enforced by the lower management. 8.6 Assignment of Authority and Responsibility The assignment of authority and responsibility is done by the middle and lower management who are in direct contact with the company's customers. The middle management strictly supervises their performance of the lower management to ensure the strategies put in place are working for the benefit of the customers. 8.7 Human Resource Policies and Practices The company also has competitive human resource policies and practices that are meant to motivate the employees to perform better to ensure they offered high quality services to the customers. Some of the good practices include fair compensation, promotion, performance appraisals and providing a conducive working environment to the employees to boost their overall performance. FLIGHT CENTER TRAVEL GROUP COMPANY ANALYSIS 14 References Benckendorff, P. J., Sheldon, P. J., & Fesenmaier, D. R. (2014). Tourism information technology. Cabi. Retrived from: https://books.google.co.ke/books? hl=en&lr=&id=Hye2BAAAQBAJ&oi=fnd&pg=PR7&dq=Benckendorff,+P.,+Sheldon, +P.+J.,+%26+Fesenmaier,+D.+R.+(2014). +Tourism+information+technology.&ots=YanzG1pgPR&sig=7XJkJ5HVaguLKleWRID MtELRCXQ&redir_esc=y#v=onepage&q=Benckendorff%2C%20P.%2C%20Sheldon %2C%20P.%20J.%2C%20%26%20Fesenmaier%2C%20D.%20R.%20(2014). %20Tourism%20information%20technology Pease, W., Rowe, M., & Cooper, M. (2007). Information and communication technologies in support of the tourism industry. Hershey, PA: Idea Group Pub. Retrieved from: http://www.irma-international.org/viewtitle/22532/ Business review weekly: BRW. (1981). Melbourne: Business Review Weekly. Retrieved from: https://books.google.co.ke/books?id=8de2AAAAIAAJ&dq=Business+review+weekly %3A+BRW.+%281981%29.+Melbourne %3A+Business+Review+Weekly.&focus=searchwithinvolume&q=Business+review+we ekly%3A+BRW.+%281981%29.+Melbourne%3A+Business+Review+Weekly Shappell, S. A., & Wiegmann, D. A. (2012). A human error approach to aviation accident analysis: The human factors analysis and classification system. Ashgate Publishing, Ltd. Retrieved from https://dvikan.notnu-studentserver/reports/A%20Human%20Error %20Approach%20to%20Aviation%20Accident%20Analysis.pdf Doganis, R. (2006). The airline business. Psychology Press. Retrived from: https://meishka.files.wordpress.com/2011/12/the-airline-business-2006.pdf FLIGHT CENTER TRAVEL GROUP COMPANY ANALYSIS 15 Ketchen Jr, D. J., Snow, C. C., & Hoover, V. L. (2004). Research on competitive dynamics: Recent accomplishments and future challenges. Journal of Management, 30(6), 779-804. Retrieved from: http://journals.sagepub.com/doi/abs/10.1016/j.jm.2004.06.002 Running head: FLIGHT CENTER TRAVEL GROUP COMPANY ANALYSIS Flight Center Travel Group Company Analysis Student's Name Course Date Tutor 1 FLIGHT CENTER TRAVEL GROUP COMPANY ANALYSIS 2 Flight Center Travel Group Company Analysis 1.0 Executive Summary Flight Center Travel Group commonly known as FCTG is one of the largest retail air travel outlet in Australia. The company was founded about 35 years ago in the year 1982. It is currently headquartered in Brisbane, Queensland, Australia and it serves various areas including Australia, New Zealand, Canada, UK, USA, South Africa, Singapore, Hong Kong, China and India among other international destinations. This company is considered to be one of the most successful air travel business story because of its average annual revenues, number of employees in its subsidiaries worldwide and the number of shops and business operated nu the company. According to the company's financial reports for the financial year 2016, the company has annual turnover of $20 billion, had employs of over 20,000 and runs over 2,800 stores and business under retail and corporate brands across the global air travel industry (Benckendorff, Sheldon & Fesenmaier, 2014). The company was co-founded by Graham Turner and Geoff Harris who are in the top management of the company to date. This project would assess the company's risks and also perform an extensive analytical procedures on the company in the industry. 2.0 Nature of the Entity 2.1 Business Operations The FCTG is a retail outlet operating in both Australia and other international destinations listed in the executive summary. The company operates various airline services, shops and business providing various services such as tour services under various retail as well as corporate brands. It is reported that the company has over 2,800 shops selling different types of consumer products FLIGHT CENTER TRAVEL GROUP COMPANY ANALYSIS 3 across the global market. It's fully operational in countries in Australia, New Zealand, United Kingdom, China, United States, Hong Kong, South Africa, United States, United Arab Emirates, Singapore and India among others. The company is licensed to operate in further 80 countries spread across the glove under corporate brand; FCM Travel Solutions. In the United States, the company deals in various popular retail and corporate brands such as GOGO Vacations Liberty Travel, Worldwide Traveler and StudentUniverse among others. The company therefore majorly deals in the travel and tour industry and also provides the consumer products needed during such travels such as hotel, catering and accommodation among others. 2.2 Investments and Investment Activities The company has invested in various sectors in the travel industry. The company as discussed in the previous section has invested in over 2,800 stores retailing its products and services across the global market. Secondly, the company has also invested in the airline, road, and water travel across the world. It owns major travel agencies in the UK, Cana and United States which deals majorly in the travel and tour services offered by the company (Panosso, 2016). Besides these, the company has also invested in other sectors of the economy including the hotel industry, real estate, fashion and education among others. These investments help in boosting the nonoperating revenues of the company. 2.3 Financing and Financing Activities Financing is the most critical aspect of the company's operations. FCTG requires huge amounts of funds to fund its global operations. The company therefore explores the various financing options that are available to raise the required finances to fund its immediate and future financial obligations. In the company's 2017 financial reports, the company reported to have raised its FLIGHT CENTER TRAVEL GROUP COMPANY ANALYSIS 4 capital from debt financing, equity financing as well as retained earnings. The company has a long-term loan of about $132 million, common stock of $403 million, retained earnings of $1 billion and treasury stock of about $11 million. The company's capital structure was majorly depended on equity financing through retained earnings because of the numerous investments that the company invested in besides its core business. 2.4 Financial Reporting Practices The company strictly follows the GAAP standards of reporting where it reports its financial statements every financial year. During reporting, the company discloses all the relevant financial information to the public in its end of year financial statements. The company also makes the SEC filings with the relevant authorities to allow scrutiny of its financial statements for tax and other regulatory purposes. 3.0 industry 3.1 Industry Size The FCTG can be categorized in the service industry owing to the type of products and services the company deals in. This is huge industry since it has numerous players offering different kinds of products and services to its customers. The industry has operations cutting across various players including retailers, travel agencies, and hotel and accommodation services industry. 3.2 Industry Growth The industry growth is very high since the service industry comprises of players that have been noted to be growing their revenues at a very high rate. FTCG for instance has recorded a constant growth of about 8% in its growth for the last five years. This growth is also reflected in the FLIGHT CENTER TRAVEL GROUP COMPANY ANALYSIS 5 industry where the industry growth is estimated to growth at a rate of 6%. This growth is expected to double in the next few years because of the introduction of technology in the operations of most players in the service industry. Most players are incorporating modern technology in their value chain which serves to improve efficiency, customer service delivery and lower operational costs resulting to a major growth in the industry. 3.3 Industry Supply Chains The industry supply chain comprise of airlines, accommodation, hotel and other tour services. Travelers from across the world would book with any player in the industry to have a trip in any part of the world. The players in the industry would process the bookings, have the traveler on a flight to his or her destinations where the companies would provide for hotel, accommodation and tour services through his or her trip. These elements therefore forms the supply chain of the travel and tour players in the industry. 3.4 Major Players Some of the major players in the global travel industry include Priceline Group with a net turnover of $39.2 billion, American Express Global Business Travel with a turnover of $30.3 billion, Carlson Wagnolit Travel with a turnover of 26.9 billion and BCD Travel with a turnover of $26.9 billion. 3.5 Market Shares of Industry Players The player have different market shares depended on their capacity and assets base. Priceline has the highest market share controlling about 35% of the global air travel market, followed by American Express with about 25%, Carlson with 15%, BCD with 8% and lastly, FTCG which controls about 7%. FLIGHT CENTER TRAVEL GROUP COMPANY ANALYSIS 6 3.6 Critical Success Factors The major critical factors that determine the success of the companies include the following. First, safety and security measures taken by the companies. There have been reported various accidents in air travel in the recent years leading to drastic loss of lives and property. A traveler will therefore choose an airline that assures him or her security and safety throughout the journey. Secondly, the quality of customer services offered would also determine the customer satisfaction and by extension the success of the company. Other factors include the cost of travel, stop points and the convenience of the airline especially for corporate and business customers. 3.7 Major Threats The major threat facing most airlines is the security threat which lead to massive loss of lives. In the past one decade, a couple of air planes have been reported to either disappear from the radar or being shot by missiles and no services have been rescued. This therefore creates a major threat since travelers will opt not to travel because they are afraid of the security threats they will be exposed to when they travel. Secondly, the modern improvements in technology has made communication more easier and swift making some business people not travel and this lowers the income generated by the airlines. 4.0 The Legal Environment Airlines are guided by strict legal requirements based on the countries where they are hosted, travel to or pass. Some countries have for instance been sanctioned by the United States and the UK and therefore, airlines from such countries are not allowed to land in the said countries. Secondly, different countries have strict laws governing air travel and the airlines are expected to company in order to continue operating in this countries. FLIGHT CENTER TRAVEL GROUP COMPANY ANALYSIS 7 5.0 External Environmental Factors 5.1 PEST Analysis FCTG operates in various countries whose political environment is considered to be relatively stable. Australia for instance is a very politically stable country and this boosts travels in and outside the country. Its neighboring countries such as New Zealand is also politically stable boosting and supporting the travel business in Australia. The success of FCTG in travel business can therefore be partly attributed to its stable political environment. The economic environment of Australia and the other countries where the company operates is also relatively stable and improving. The economy of Australia has registered a major growth after the 2007 global financial crisis that affected almost all the big economies in the world. However, Australia has shown a significant improvement in its economy in the last one decade and this has impacted the travel business positively. The social environment of the country is also improving where the rate of unemployment in Australia has considerably decreased. This therefore implies that most Australians are now willing and able to go for trips abroad and also allow visitors to travel into their country as tourists. Lastly, the massive improvement in modern technology has also positively impacted the business since the air travel services can now be accessed by consumers across the global market. 5.2 SWOT Analysis A thorough analysis of the company and its environment also reveals various strengths and weaknesses internally and opportunities and threats externally. To begin with strengths, the company has a very stable asset base since it has invested massively in other sectors of the economy to diversify its operations. This makes the company stable despite some to of the FLIGHT CENTER TRAVEL GROUP COMPANY ANALYSIS 8 challenges facing the air travel industry in the recent years. However, the major weakness of the company is that it leases most of its airlines which makes its rather costly to run. The opportunities in the market exist in the sense that there has been an increasing number of travelers in the recent years both from Australia and internationally. The company can therefore tap into this market to raise higher revenues. However, the major threat that the company faces is competition from other established players. Given the current competition for business, most established players in the industry are offering very competitive rates that would make it unprofitable for the FTCG to adequately compete with them threating its survival in the industry. 5.3 Porter's Five Forces Analysis This analysis will focus on the competition in the industry, potential of new entrants, power of suppliers and customers, and threat of substitute products or services. To begin with competition, FTCG faces stiff competition from other established players in the global airline industry. There are various established players who are market leaders in the industry and therefore control a huge market share of the industry. FCTG will therefore find it difficult to compete with such players in the global industry since they are market leaders and already have a sizeable share of the market. Secondly, the air travel industry has little or no threats to entry since it requires large amount of initial capital to enter into the industry. It would not be easy therefore for other players to enter into the already saturated industry. Thirdly, they is a higher power of suppliers of the airlines and other products or services in the industry since these are big players. There is limited power of customers since they cannot control the pricing of the products or services industry. Price and quantity is normally determined by the forces of demand and supply. There are also numerous substitute product or services in the industry creating a major problem for the players. FLIGHT CENTER TRAVEL GROUP COMPANY ANALYSIS 9 Technology for instance can be used instead of someone having to travel. There are also other forms of travelling which include water, road and train travel. 5.4 Other External factors The other external factors that have an impact on the air travel industry both locally and globally include the safety and security factors involved in air transport. The recent wake of security concerns on issues related to air accidents, terrorism and unfavorable weather conditions has had a significant negative impact on air travel both locally and internationally. 6.0 Objective, Strategies and Assessing Business Risks 6.1 Industry Developments The recent challenges in the air travel industry has led to various developments to boost the confidence of customers on issues related to their safety and security during air travelling. Some of the developments include increased use of technology to boost the safety of the travelers, introduction of direct flights and change of air routes in areas that are considered more insecure (Ketchen, Snow, & Hoover, 2004). 6.2 New Products and Services There has been introduction of other products and services so as to encourage travelling and also help in diversification of the product line for the air lines. Most air travel companies are considering other products and services such as hotel and accommodation, other forms of traveling such as water, road and train and touring services to boost their profits. 6.3 Expansion of the Business FLIGHT CENTER TRAVEL GROUP COMPANY ANALYSIS 10 The introduction of new products and services for most players in the air travel industry has resulted in the expansion of business (BRW, 981). FCTG for instance currently operates numerous business ventures in various location across the country most of them offering services that are either different or compliment the air travel business. 6.4 New Accounting Requirements The new accounting requirement that focuses on the air travel business include the expected change in accounting lease standard from the current IFRS 17 to IFRS 16. The new accounting standard would impact the treatment of leased assets which are very common with air travel business. In the new standard which would be implemented in January 2019, leased assets would be treated as liabilities to the lessee. This would therefore increase the liability of the company on its financial statements. 6.5 Regulatory Requirements The increased risks on the safety factors in air travel has resulted to most countries putting in place strict regulations to protect the safety of the travelers. Air planes flying to the United States for instance are prohibited from flying in some countries such as the Middle East which make the prone to attacks by missiles (Shappell & Wiegmann, 2012). This is meant to protect the safety of the travelers traveling to or from the United States. 6.6 Current and Prospective Financing Requirements The current and prospective financing requirements of FCTG has significantly increased because of the numerous products line offered by the company. Unlike in the past, the company has expanded to global markets and is currently offering a wide range of products. It therefore, requires higher amount of funding both currently and in the future to finance its operations. FLIGHT CENTER TRAVEL GROUP COMPANY ANALYSIS 11 6.7 Use of IT FCTG has incorporated the use of IT in its operations to boosts its efficiency in customer service delivery and also lower the cost of operations. Technology is one critical factor in bettering the quality of services offered by a company. Amidst the stiff competition in the air travel industry, FCTG cannot compete effectively if it fails to leverage the advantages of technology in its operations (Doganis, 2006). This has therefore motivated the company's management to incorporate technology in majority of its operations in the recent past. 6.8 Effects of Strategy Implementation The company has implemented various strategies including diversifying its product line, expanding into new markets and incorporating technology in its value chain. This strategy implementation has impacted the company in various positive ways. First, the company has boosted its survival in the industry despite the stiff competition from other established players. Secondly, the strategies have also improved the profitability of the company and lastly, technology has helped in improving the quality of services offered and lowering the operational cost of the company making it more competitive in the industry. 7.0 Performing Entity Analysis There are numerous challenges in the air travel industry as discussed in the previous sections. However, FCTG has continued to consistently improve in its performance because of the strategies it has implemented in its value chain. First, the company has now expanded in over 23 countries across the globe which makes its very competitive in the industry (BRW, 981). Secondly, the company is currently offering a wide range of products and services boosting its FLIGHT CENTER TRAVEL GROUP COMPANY ANALYSIS 12 survival in the market. Lastly, introduction of technology in its value chain has also helped the company to remain competitive and profitable in the industry. 8.0 Management and Governance 8.1 Communication and Enforcement of Integrity and Ethical Values Communication is very critical to the success of any company. In FCTG, the company's management encourages communication at all levels to ensure the smooth running of operations. The company's management also enforces integrity and ethical values among the employees and in their interaction with the customers to create a good impression which is important in creating a good image for the company. 8.2 Commitment to Competence The company's goal is also committed to competence where the company promises to serve the needs of their clients with the highest levels of competency possible (Pease, Rowe & Cooper, 2007). This is important in ensuring the satisfaction of their customers which boosts customer loyalty. 8.3 Participation by those Charged with Governance The managers are required to actively participate in the active governance of the company. Managers are required to take responsibility of their teams and ensure that they all perform their duties and responsibilities to satisfy their customers. 8.4 Management Philosophy and Operating Style FLIGHT CENTER TRAVEL GROUP COMPANY ANALYSIS 13 The company's management philosophy and operating style is focused on the client. The company's management ensures that its employees puts all the measures in place to ensure that their customers are satisfied with the type of services or products offered. 8.5 Organizational Structure The organization has an elaborate structure with a definite chain of command consisting of the top, middle and lower management. The top management is charged with setting strategies which are implemented by the middle management and enforced by the lower management. 8.6 Assignment of Authority and Responsibility The assignment of authority and responsibility is done by the middle and lower management who are in direct contact with the company's customers. The middle management strictly supervises their performance of the lower management to ensure the strategies put in place are working for the benefit of the customers. 8.7 Human Resource Policies and Practices The company also has competitive human resource policies and practices that are meant to motivate the employees to perform better to ensure they offered high quality services to the customers. Some of the good practices include fair compensation, promotion, performance appraisals and providing a conducive working environment to the employees to boost their overall performance. FLIGHT CENTER TRAVEL GROUP COMPANY ANALYSIS 14 References Benckendorff, P. J., Sheldon, P. J., & Fesenmaier, D. R. (2014). Tourism information technology. Cabi. Retrived from: https://books.google.co.ke/books? hl=en&lr=&id=Hye2BAAAQBAJ&oi=fnd&pg=PR7&dq=Benckendorff,+P.,+Sheldon, +P.+J.,+%26+Fesenmaier,+D.+R.+(2014). +Tourism+information+technology.&ots=YanzG1pgPR&sig=7XJkJ5HVaguLKleWRID MtELRCXQ&redir_esc=y#v=onepage&q=Benckendorff%2C%20P.%2C%20Sheldon %2C%20P.%20J.%2C%20%26%20Fesenmaier%2C%20D.%20R.%20(2014). %20Tourism%20information%20technology Pease, W., Rowe, M., & Cooper, M. (2007). Information and communication technologies in support of the tourism industry. Hershey, PA: Idea Group Pub. Retrieved from: http://www.irma-international.org/viewtitle/22532/ Business review weekly: BRW. (1981). Melbourne: Business Review Weekly. Retrieved from: https://books.google.co.ke/books?id=8de2AAAAIAAJ&dq=Business+review+weekly %3A+BRW.+%281981%29.+Melbourne %3A+Business+Review+Weekly.&focus=searchwithinvolume&q=Business+review+we ekly%3A+BRW.+%281981%29.+Melbourne%3A+Business+Review+Weekly Shappell, S. A., & Wiegmann, D. A. (2012). A human error approach to aviation accident analysis: The human factors analysis and classification system. Ashgate Publishing, Ltd. Retrieved from https://dvikan.notnu-studentserver/reports/A%20Human%20Error %20Approach%20to%20Aviation%20Accident%20Analysis.pdf Doganis, R. (2006). The airline business. Psychology Press. Retrived from: https://meishka.files.wordpress.com/2011/12/the-airline-business-2006.pdf FLIGHT CENTER TRAVEL GROUP COMPANY ANALYSIS 15 Ketchen Jr, D. J., Snow, C. C., & Hoover, V. L. (2004). Research on competitive dynamics: Recent accomplishments and future challenges. Journal of Management, 30(6), 779-804. Retrieved from: http://journals.sagepub.com/doi/abs/10.1016/j.jm.2004.06.002