Transurban Group’s 3 Strategic Issues
write the essay based on the following question:
Based on the external and itnernal environment of Australia’s toll roll operation industry (or tranportation
infrastructure industry), what are three (3) major strategic issues facing Transurban Group, and why?
(2) POSSIBLE (and FEASIBLE) strategic actions for the company
TRANSURBAN GROUP’S 3 STRATEGIC ISSUES 2
Q: Based on the external and internal environment of Australia’s toll roll operation
industry (or transportation infrastructure industry), what are three (3) major strategic
issues facing Transurban Group, and why?
Transurban Group is involved in development, maintenance, and operation of toll roads
in Melbourne and Sydney, Australia and in Virginia, United States. In addition, the Group is in
the process to acquire the Cross City tunnel in Sydney (Haque, 2011: 267). It has its headquarters
in Melbourne, Australia. One of the major external strategic issue facing the Transurban Group is
the continued growth of backlog and demand for infrastructure projects on the side of the
government in Australia which they cannot all fund. The choice of the governemt is in this
regard limited especially when the political priority is placed on maintaining given credit ratings
(Regan et al., 2011: 6).
This presents as a challenge since the company is funded by the government in
undertaking its projects and in cases where the government is unable to finance projects implies
a decline in business or a need to source alternative approaches to the issue. The government’s
main sources of funds for large projects like the transportation infrastructure is primarily come
from increased taxes or user pays. However, recently the private sector has emerged as a solution
to the problem, a high level of patronage risk on the side of the company involved (Low and
Odgers, 2012: 189). The Transurban Group, for instance, in its strategic plans aims at partnering
with the government as part of the problem. The company sources for funding from its investors
and by using their high capabilities and expertise delivers long-term outcomes for the
government and the community. Such a big and highly risky investment requires several
considerations that presents not only the challenge of planning but also management and
implementation to ensure that in addition to solving the transportation problem for the
TRANSURBAN GROUP’S 3 STRATEGIC ISSUES 3
government, they as well lower the investment risk and enhance on returns. One of the ways that
the company expects to raise the funds is through a rights issue which is postulated to raise $2.34
billion as well as an extra $400 million through placement to its bid partners (Goldberg, 2009: 9).
Another external issue which is of concern to the Transurban Company is the challenge
of competition from its close rivals such as Leighton Contractors, Macquarie Infrastructure,
Queensland Motorways, and Connect East. The companies pose a great threat to Transurban’s
business presenting numerous strategic issues such as overbidding for toll road concessions. It
has been noted that overbidding has continued to present a challenge for the Transportation
companies as bidders compete to win attractive long-term concession contracts. Overbidding is
the bidding beyond an asset’s worth especially in the transport sector by submitting over-
optimistic projections of traffic and revenue.
This element of the transport sector business is risky and can lead to commercial failure
and project distress and in turn dampen the enthusiasm of subsequent private sector investment
(Regan et al., 2011: 8). Competition has several other financial impacts on the company in terms
of business opportunities, human resources, and costs incurred in earning the company a
competitive edge over its rivals. For instance, the company requires remaining at the edge
through an effective public relations strategy and initiative (Australia, 2014: 5). For instance,
Macquarie Infrastructure, the leading toll road operator in the world, has a well established
business infrastructure in a diversity of sectors in a number of countries across the world. The
company has since developed a cost reduction program was initiated in June 2008 aimed at
saving and negating inflation pressures (Australia, 2014: 16).
TRANSURBAN GROUP’S 3 STRATEGIC ISSUES 4
Internally, the Transurban group has recently been facing some system breakdowns that
have greatly threatened the company’s business (Interim 2014: n.p). Transurban has experienced
some tunnel outage causing widespread disruptions in their major roads in Melbourne. The
outages are caused by failure within their tunnel communication network, an integral component
of the safety systems (Research, 2008: n.p). Although CityLink, the company concerned with
providing the service, has back-up systems, they have also not helped in such situations as they
have also been found to fail.
The communication system is a big investment whose failure is such a loss for the
company in terms of finance as well as the negative impact on the company’s brand name and
image (Auer et al., 2012: 142). System failure also puts the road users at risk since it would be
difficult to respond in case of anything happening on the tunnels during such failures
(Yigitcanlar, 2010: n.p). In addition closure of the tunnels as a result of outage causes serious
disruptions on the traffic flow causing unnecessary inconveniences to road users. The company
is also likely to spend quite a hefty amount in addressing the system breakdown problem or in
installing new systems.
The Transurban group can achieve better result on their toll roll roads by enhancing their
effectiveness on the communication systems and adopting better and advanced technologies in
their communication systems. The company should also adopt a strategy to diversify its portfolio
of the toll roads, upgrade roads as needed, and drive operational efficiencies so as to ensure that
the company has a competitive edge over their rivals.
TRANSURBAN GROUP’S 3 STRATEGIC ISSUES 5
References
Auer, P, Clibborn, S, & Lansbury, R 2012, ‘Beyond our control: labour adjustment in response to
the global recession by multinational auto companies in Australia’, Australian Bulletin of
Labour, 2, p. 142, Business Insights: Essentials.
‘Australia Business Forecast Report’ 2014, Australia Business Forecast Report, 1, pp. 1-59,
Business Source Complete.
‘Australia Infrastructure Report’ 2014, Australia Infrastructure Report, 2, pp. 1-146
Goldberg, JL 2009, ‘The valuation of toll roads and the implication for future solvency with
special reference to the Transurban Group’, Journal Of Business Valuation And Economic
Loss Analysis, 4, 1, pp. 1-18.
Haque, T 2011, ‘Lead-Lag Effects in Australian Industry Portfolios’, Asia-Pacific Financial
Markets, 18, 3, p. 267.
Interim 2014 Transurban Group Earnings Presentation – Final’ 2014, Fair Disclosure Wire,
Business Insights: Essentials.
Low, N, & Odgers, J 2012, ‘Rethinking the Cost of Traffic Congestion, Lessons from
Melbourne’s City Link Toll Roads’, Urban Policy & Research, 30, 2, p. 189.
Regan, M, Smith, J, & Love, P 2011, ‘Impact of the Capital Market Collapse on Public-Private
Partnership Infrastructure Projects’,Journal Of Construction Engineering & Management,
137, 1, pp. 6-16.
TRANSURBAN GROUP’S 3 STRATEGIC ISSUES 6
Research, M 2008, ‘Research and Markets: Transurban Group Fundamental Company Report
Including Financial, SWOT, Competitors and Industry Analysis’, Business Wire
(English), 6, Regional Business News.
Yigitcanlar, T 2010, Rethinking Sustainable Development : Urban Management, Engineering,
And Design, Hershey, PA: Information Science Reference.
