INTERNAL ANALYSIS

The mission of Norfolk Southern is to enhance the value that stakeholders get on investment. This mission is achieved by providing freight transportation services that are of high quality. The company is keen sensitive on ensuring that the share value is improved; that is why they took the time to analyze the benefits that will be realized through acquisition. The company came up with a strategic model that would help in the attainment of the 2020 goals. Its performance can be analyzed by looking at the trend of operating ratio.

The Contingency Value Right will provide security to Norfolk Southern so even if the company obtains the shares they are guaranteed that they will not suffer financial loss (Esty, & Mayfield, 2016). The CVR will also help the company to become more profitable because it discourages the shareholders from selling their shares. Through guarantee that the price of the stock will not fall below a certain price, the shareholders are more contented and remain hopeful that the company will become more profitable.

In 2014 the operating ratio for the company was 0.692, and in 2015 it increased to 0.711 which shows that the profits for the company had decreased (Esty, & Mayfield, 2016). It is for this reason that the Canadian Pacific had to analyze the company before making a merger decision. In 2015 alone the operating ratio for Canadian Pacific was 0.61 and for Norfolk Southern 0.71. This shows that in this year the Canadian Pacific performed better than Norfolk Southern Corporation.

The acquisition move was aimed at boosting its cash flow and increasing the shareholder value (Esty, & Mayfield, 2016). The Norfolk Contingent was trying to prove that it could do better alone and that it was possible to reduce the operating ratio by 75 percent. There is coherence because the company did not rush to make decisions on the acquisition but instead took time to carry out self-assessment. The company is coherent as it does not spend its resources on the activities that are not beneficial to the company as well as shareholders.

References

Esty, B., & Mayfield, S. E. (2016). Canadian Pacific’s Bid for Norfolk Southern. HBS Case Study, (216-057).