Trade-Off between Capitals - Case Study Example

Name: Institution: Date: Munich Airport Business Model A business model refers to the system of inputs, business activities, outputs, and outcomes that a firm uses to create value over the short-run, medium-, and long-run. Munich Airport has a unique business model that enables it to achieve its objectives. Business model enable the company to remain relevant (Kaplan, 2012). In terms of capitals, each of the six main capitals for Munich Airport contributes to value creation. The financial capital generates over 1.25 billion euros revenue annually. In 2015, the infrastructural capital led to the renovation of arrivals level in Terminal 2 and interior fittings for Terminal 2 satellite building. The expertise capital has generated over 30,000 training days at the Airport Academy and first 5-star airport in Europe. In 2015, Munich Airport had a human capital reaching over 8,285 employees with approximately 400.3 million euros personnel expenses and 276 apprentices across the company. On its part, environmental capital includes over 40,000 tons of CO2 saved by power plant and block heat. Also, the recycling rate for de-icers significantly exceeds 50 percent. In terms of society capital, over 34.9 million euros were paid in form of tax in 2015 and 96.5 million euros in procurements. Financial Capital Munich Airport experiences a significant increase in its financial capital year after year. The company generates financial capital from loans it obtains from financial institutions and operating cash flows from its business activities. The Group has solid funding forms which form the foundation of its long-term earnings power, financial stability, and profitability. The Group recorded significant increase in cash equivalents in 2015 financial period. At the beginning of the 2015 financial year, the company had cash equivalents amounting to 101.5 million euros whereas the loan portfolio was 2,344.1 million euros and 1,907.0 million euros in equity (Munich Airport, 2016). The amount issued to shareholders amounted to 30 million euros while the one retained by the company amounted to 70.1 million euros. The total amount that was realized in net income amounted to 135.4 million euros and all of it was credited to equity. At the company’s annual general meeting, the shareholders were the main decision-makers of how the operating profits were going to be used. The total cash flow generated from Group’s operating business in 2015 financial year totaled 464.4 million euros. The Group spent a total of 272.1 million euros to enhance and maintain its airport’s infrastructure whereas 119.0 million euros was saved in financial institutions. A total of 31.1 million euros was used to pay bank loans. The output realized from the Group’s financial capital included a rise in cash equivalent by more than 100.0 million euros reaching a total of 217.3 million euros. The group’s loan portfolio also rose to 2,418.4 million euros having increased by 74.3 million euros. Equity also rose to 2,026.7 million euros being an increase of 119.7 million euros (Munich Airport, 2016). Trade-off between Financial Capital and Infrastructural Capital As indicated above, Munich Airport injected significant amounts of cash into the infrastructural capital from financial capital. This shows the importance that the Group places in infrastructure and this may due to the reason that Munich Airport relies on transport and building infrastructure. The company has to ensure that it continually services and maintains these transport and building infrastructures in good condition. This maintenance is important in ensuring that the airport maintains its attractiveness. The inputs include open spaces, buildings, and transport links with the output being the same Therefore, infrastructural capital gets increases by engaging in trade-off with the financial capital with the latter getting decreased. Another type of trade-off exists between financial capital and human capital. Munich Airport highly values its employees because they are the ones responsible for its success. To fulfill and satisfy the needs of its employees, the company has in place a modern and effective human resources policy which has company’s people and business needs in mind. It therefore offers its employees a wide range of opportunities to develop themselves and an exciting environment (Munich Airport, 2016). To achieve this Munich Airport injects significant amounts of cash in training its employees. It also offers generous bonuses as a reward to its highly productive workforce. Another type of trade-off exists between financial capital and expertise capital. The company offers careers for all levels of education in its Airport Academy and in in-house professional development center. The company also injects significant amount of finances in open innovation labs, higher education centers, ideas pool, and innovation mentorships among other activities meant to improve the expertise of its people. In return, the outputs realized include careers/qualifications, quality/innovation management, and off-campus/consultancy business (Munich Airport, 2016). Although these inputs significantly reduce financial capital, the company gains in terms of output. For example, its Airport Academy is recognized as one of the quality and certified training providers with 30,000 training days. Another trade-off exists between financial capital and environmental capital. The Company is aware that it has a responsibility to ensure it conserves and protects the environment by not engaging in activities that can be harmful to the environment. The Group engages in activities that are meant to ensure climate-neutral growth by 2020. Munich Airport has in place a sophisticated waste management concept, de-icer treatment, and ensures it uses drinking water efficiently. Huge investments that the company makes in human capital significantly create value for the company. Although Munich Airport injects huge amounts of financial resources, time, and energy into human capital, the output realized are significantly great. For example, as has been observed earlier in the report, the capital the company injects in the Airport Academy has made the Academy be recognized as one of the quality and certified training providers with 30,000 training days. Comair Limited Comair Limited is a Group that operates scheduled airline services and has two brands the kukula brand and the British Airways brand. The company is listed on the Johannesburg Stock Exchange since 1998 (Comair Limited, 2015). The company offers scheduled and non-scheduled airline services in South Africa, Indian Ocean Islands, and sub-Saharan Africa as its main business activity. Comair has been operating in South Africa since it was founded in 1946. It is singled out as the only airline that has achieved operating profits for 69 consecutive years and also has a safety record which is recognized globally. Business Model Through using right equipment and people, Comair Limited seeks to deliver high quality travel experience to all its customers. Its business model is aimed at making customers happy because in so doing, these customers will keep coming back and this will make investors to continue investing in the company. This in turn gives the company more resilience to change and move forward in a more sustainable way. The Group’s motto is that “By lifting myself up, I can lift my colleagues up; to lift our customers up; to lift investors up; to lift society up; to lift nations up; to lift the world up; to fit myself up” (Comair, 2015). Trade-off between Financial Capital and Expertise Capital The Group has invested significant amounts of financial resources in expertise improvement activities and programs, including catering programs. According to Comair Limited (2015) financial report, the Group launched its own catering unit in 2012 under the Food Directions brand producing experts who provide on-board catering services to British Airways and kukula flights. This gives the Group greater flexibility in terms of product offering and cost. The Group also trains its own pilots in its Comair Training Centre (CTC). Other training programs that are offered at the Centre include flight simulator training for the full range of Boeing 737 type aircraft. The Group is also designing and developing a purpose-built cabin crew training facility aimed at training both the Group’s cabin crew and the third party cabin crews (Comair, 2016). The Group continues to attract the best talents in the business while continually investing in their development and well-being. After it takes in these talents, the Group trains and develops their skills the major priority being to ensure that they provide the company and its customers with quality and exceptional services. According to Comair (2015), it has spent around 3.09 percent of payroll during the period under review to support its commitment to skills development and training. This is the greatest trade-off between financial capital and human capital and expertise. Another valuable trade-off is between financial capital and societal capital. Society represents one of the most important capitals for Comair; therefore, the company continually seeks to improve the lives of all individuals in the society. The way in which the company achieves this is by alleviating some of the socio-economic challenges that the society faces. The Group is also committed to protecting the environment, ensuring effective and responsible utilization of resources, and adoption of sound environmental practices. Therefore, the Group injects significant amounts of cash in initiatives that are directed at protecting the environment. The Value of Investing in Human Capital Just like in Munich Airport, human capital is very important to Atlantia Group because, the Group is highly reliant on its employees. In the long-run a firm’s recruitment, development, and reward practices strongly influence its values and priorities (Charter & Tischner, 2001). Most definitions of social sustainability and companies studies emphasize on human resource issues. Directing considerable effort of human capital brings positive contribution not only to the company but also to individual employees. Other forms of capitals should be directed to human capital because the maintenance and enhancement of human capital is an important objective of a sustainable business. Maximum opportunities should be available for staff to enhance not only their employability skills but also their personal development. Atlantia Group Business Model Atlantia Group’s business model is focused on the field of infrastructures and mobility networks. Atlantia Group is a company dealing with the management of transport infrastructures around the world. The company manages over 5,027 km of motorway network in Brazil, India, Italy, Poland, and Chile. The Group also operates two airports with more than 100 airline companies in over 240 destinations around the world. Atlantia publishes its integrated reports annually in accordance with the GRI G4 Guidelines. Trade-off between Financial Capital and Infrastructure Capital For a long period, there has been a positive relationship between financial capital and infrastructural capital at Atlantia. The Group has been injecting huge amounts of money to design, construct, and maintain airport and highway infrastructure, traffic control, and security. According to Atlantia Group’s report, Atlantia is the biggest investor in Europe with investments nearing €22 billion in motorway network in Italy and a further €12 billion in developing Aeroporti di Roma (Atlantia, 2016). Trade-off between Financial Capital and Environmental Capital Atlantia Group highly invests huge amounts of financial resources to operate according to environmental, ethical, and governance principles that adhere to highest international environmental standards. As a result, the Group has achieved results that are recognized and rewarded internationally. For example, since 2009, the Atlantia Group has been a member of the Dow Jones Sustainability World Index (Atlantia Group, 2016). The Group also injects huge amounts of financial resources to design, construct, and maintain energy saving technologies. Trade-off between Financial Capital and Societal Capital Atlantia Group has been engaging itself in activities that are aimed at improving motorways in countries it has operations in. These activities help improve road safety and traffic flow; improve visibility and driving comfort in the rain, reduce noise pollution, and reduce the risk of aquaplaning and ‘spray’ (spraying of water that would normally have remained on the pavement). To achieve this, the Group has been using self-draining asphalt which represents a mixture of high porous materials for road paving. These initiatives have significantly reduced the number of accidents and deaths in areas Atlantia Group operates. The accident rate on the Polish motorway network significantly reduced in 2015 where it equaled 6.3 compared to 7.1 in 2014. Even in other, areas such as Colinas, Los Lagos, and Rodovia MG050, the accident rates also dropped considerably. Trade-off between Financial Capital and Human Capital As has been indicated earlier in this paper, Atlantia Group significantly invests in human capital. For example, in 2015, the Group increased its employee base by 6 percent. The Group also increased its employee stability rate whereby, at the end of 2015 financial year, the Group’s part-time employees were 8 percent of the total number of employees having been reduced by half compared to the numbers in 2014 (Atlantia, 2016). The increase in number of permanent employees can be attributed to an increase by the Group in insourcing of activities, including activities such as the management of cleaning at Ciampino and Fiumicino airports, and the improvement actions targeted at passenger service among other activities. Other ways in which the Group is committed to human resource include developing competencies, enhancing talents, providing safe working environments, and creating a robust employee welfare system focused on enhancing work-life balance. Atlantia Group commits itself to attracting and retaining employees with high quality talents. To achieve this, the firm has implemented recruitment and selection policies for the purpose of identifying individuals with high potential; The Group also invests in projects such as Atlantia for Knowledge project which it undertook in 2015 leading to the development of round tables, interdisciplinary activities, and theme-based workshops. This project provides Italian universities students with internships and scholarships. The Group’s 2015 integrated report shows that the Group was focused on investing more in the promotion of professional training and upgrading employees with its main focus being on the drivers that relate to employees’ safety, service quality, key values, and priorities for the Company. References Atlantia (2015). 2015 Integrated Report. Retrieved from http://www.atlantia.it/pdf/csr/2015_Integrated_Report.pdf Charter, M. & Tischner, U. (2001). Sustainable Solutions: Developing Products and Services for the Future. Greenleaf Publishing Comair Limited (2016). 2016 Integrated Annual Report. Retrieved from https://www.comair.co.za/Media/Comair/files/2016/Annual-Report-2016.pdf Comair Limited (2015). 2015 Integrated Annual Report. Retrieved from https://www.comair.co.za/Media/Comair/files/2015/Annual-Report-2015.pdf Kaplan, S. (2012). The Business Model Innovation Factory: How to Stay Relevant When the World is Changing. New Jersey: John Wiley & Sons. Munich Airport (2015). Annual Report 2015 Munich Airport: Business Model. Retrieved from http://www.munich-airport.de/media/download/general/publikationen/en/ib2015_kapitalarten.pdf Read More