Airtex Aviation

Executive Summary

AirTex Aviation is an aviation company, where located in one of the most rapidly growing communities in San Miguel Airport. The company provides fuel line services, Flight training and Aircraft sales. Unfortunately, due to poor organization structure and management team, the company goes to bankruptcy in early 1989. Two Harvard business students, Ted and Frank are interested in purchasing and helping a failing business that show a lot of potential. Both of them would like to implement decentralization strategy and a new control system for this failing company in order to change the current poor organizational structure.

Ted and Frank’s Strategic Objectives and What Made Air Tex a Good Target

Ted and Frank had an ambition to do a “turn around” in a failing business with potential and Air Tex seemed to meet their strategic objectives for the following reasons:

1. Affordability

Ted and Frank purchased Air Tex Aviation’s stock of $100,000 including leasing on the building with purchasing option. Later on, they exercise the option less than the market value, and sell and lease back the building. By doing this, they have already increase the working capital of $500,000.

2. Management

The poorly managed organizational structure of Air Tex became attractive to Ted and Frank and they both believed the company was in need of a new structure - decentralization. They had the skills and ability gained from school and workplace to create a new decentralized environment by making every department a profit centre.

3. Segment Focusing

Unlike any oligopolistic companies, such as those from the oil or telecommunication industries, Air Tex was considered as a fragmented business as none of the businesses in the industry had was large enough to become the price leader. Out of many aviation companies, the segment that they were focusing on was the aviation community.

4. Profitability

The company is located in one of the most rapidly growing communities...