Economic Analysis of Aurizon Holdings Limited: A Sustainability Report

This report presents a comprehensive economic and sustainability analysis of Aurizon Holdings Limited. It begins with an overview of the company, including its business type, products, customers, and competitors, along with their locations and market shares. The report analyzes the competitive environment, including close substitutes and the elasticity of demand. It examines Aurizon's production costs, factors of production (manpower, locomotives, fuel), and overall cost structure. The macro business environment is assessed, considering political and economic situations, including inflation, unemployment, interest rates, and the impact of recessions and exchange rates. The report also explores Aurizon's sustainability practices, the impact of its production and consumption, and their long-term viability. Finally, the report concludes with a summary of the key findings and references.

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Economics for a Sustainable World

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Table of Contents
Introduction................................................................................................................................4
Overview of Aurizon Holdings Limited....................................................................................4
Name and Location of Business.............................................................................................4
Type of Business....................................................................................................................4
Products of Aurizon...............................................................................................................4
Main Customers of Aurizon...................................................................................................7
Location of Customers...........................................................................................................7
Main Competitors to Aurizon................................................................................................7
Location of Main Competitors...............................................................................................8
Approximate Market Share of Aurizon and its Competitors.................................................8
Analysis of the Competitive Environment of Aurizon..........................................................9
Close Substitutes for Aurizon’s Products..............................................................................9
Elasticity of the Demand Curve of Aurizon...........................................................................9
Ability of Aurizon in generating a Mark-Up.......................................................................10
Production Costs and Scale......................................................................................................10
Factors of Production...........................................................................................................10
Manpower........................................................................................................................10
Locomotives and Trains...................................................................................................10
Fuel and Energy Resources..............................................................................................10
Other Factors....................................................................................................................11
Grouping of Factors of Production......................................................................................11
Overall Cost Structure of Aurizon’s Business.....................................................................11
Macro Business Environment of Aurizon................................................................................11
Political Situation.................................................................................................................11
Economic Situation..............................................................................................................12

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Rate of Inflation...............................................................................................................12
Unemployment Rate.........................................................................................................12
Average Interest Rate.......................................................................................................12
Boom or Recession..........................................................................................................13
Exchange Rates and Changes of Export Country............................................................13
Quality of the Main Products...........................................................................................13
Nature of Demand during Recessions..............................................................................13
Impact of the Economic Climate on Sales.......................................................................13
Problems in getting access to Key Factors of Production................................................14
Impact of Change in Exchange Rates on Imports and Exports........................................14
Sustainability Practices of Business.........................................................................................14
Impact of the Production Process of Aurizon......................................................................14
Impact of Consumption of Product Generated by Aurizon.................................................16
Impact of Sustainability Practices on Long-Term Viability of Firm...................................16
Conclusions..............................................................................................................................16
References................................................................................................................................17

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Introduction
The report focuses on conducting an evaluation of Aurizon Holdings Limited in terms of its
operation in Australia and a foreign branch like United States. It would also focus on
conducting an economic analysis of the Australian and the Chinese market where Aurizon
tends to export its products. Finally, sustainability analysis and evaluation of Aurizon would
also be carried out in the report.
Overview of Aurizon Holdings Limited
Name and Location of Business
The name of the business is Aurizon Holdings Limited and it is based in Queensland,
Australia (Aurizon Holdings Limited , 2017).
Type of Business
Aurizon operates as a potential rail freight operator in Australia and ranks as one of the top
50 companies listed in the Australian Securities Exchange (ASX). Aurizon contributes in
supporting around 250 million tons of merchandises that helps in generating a network
between miners, producers and also the greater industry constituted by both international and
domestic markets. Further, Aurizon also contributes in generating effective freight and
logistics solutions to its clients based on a network of rail and road (Aurizon Holdings
Limited , 2017).
Products of Aurizon
Aurizon serves its customers in terms of helping in the movement of increased amount of
coal resources amounting to greater than 500,000 tons for different markets like Japan, South
Korea, China, India and also Taiwan.

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(Aurizon Limited , 2017)
Further, Aurizon also operates as a specialist in Bulk Rail Freight where it serves in
generating supply chain solutions in an integrated fashion to miners, producers and other
domestic and international clients (Aurizon Limited , 2017).
In the intermodal category, Aurizon operates based on rail freight for movement of large
containers and also pallets between different Australian regions.

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(Aurizon Limited , 2017)
Further, Aurizon provides different types of specialist services to its clients in the form of rail
designing, engineering services, construction activities, management and maintenance of
construction works and also other types of supply chain services (Aurizon Limited , 2017).

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(Aurizon Limited , 2017)
Main Customers of Aurizon
The main customers of Aurizon focus on procuring different types of commodities and
services associated to the mining, agricultural, retail and also associated to different industrial
sectors.
Location of Customers
The customers are located along different towns and cities across various regions of
Australia. The customers purchasing coal products are based along Eastern ports and for iron
products reside along the western region. Further, coal rail networking services are rendered
by Aurizon to clients along Central Queensland region (Aurizon Limited , 2017).
Main Competitors to Aurizon
Different competitors of Aurizon are listed as follows.

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Location of Main Competitors
The competitors of Aurizon are based along different regions of Australia and also along
other international markets based in United States.
Approximate Market Share of Aurizon and its Competitors
Aurizon Holdings Limited tends to holds the highest market share in Australia while sharing
the same with its closest competitor, Asciano Limited. They are followed by companies like
Intoll Group, Riverside Motorway Group and finally Engenco Limited. The same is reflected
in the following illustrated below.

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(GuruFocus.com, 2017)
Analysis of the Competitive Environment of Aurizon
The above situation reflects that Aurizon Limited operates in a perfectly competitive market
in Australia.
Close Substitutes for Aurizon’s Products
Trucking Services or Truck Load Services act as an effective substitute to Intermodal
Shipping Services rendered by Aurizon Limited in Australia. It serves as an effective
transportation system shifting cargoes across road networks (Levinson, 2015).
Elasticity of the Demand Curve of Aurizon
The demand curve for Aurizon Limited is observed to be elastic in nature such that the
demand for the intermodal and rail freight services is affected owing to changes in the price

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structure. The freight services of Aurizon are financed by the regional and national
government of Australia for helping in the reduction of prices to customers (Aurizon, 2017).
Ability of Aurizon in generating a Mark-Up
The impact of the Debbie Cyclone reflects that Aurizon has required incurring increased cost
for generating repairs and also for development of haulage lines for hauling of coals. The
same has affected the ability of Aurizon in generating an effective markup (Regan & Freed,
2017).
Production Costs and Scale
Factors of Production
The factors of production operational in Aurizon Limited that contribute in the generation of
freight services to diverse client groups are identified as under.
Manpower
The productivity of the staffs involved in conducting the operations of the company based in
Queensland region is enhanced through the involvement of needed flexibility and also the
alignment of the human resources with necessary tools. The operational crew in Queensland
was directed to go on leave during the period of low or no demand. Similarly, the
identification of roles and responsibilities for the staffs also accounted for improvement of
productivity.
Locomotives and Trains
Locomotives and trains also account for another important factor of production that helps
Aurizon in effectively conducting its freight networking. The company management
increasingly focused on improving the productivity of the same for generating greater returns.
Fuel and Energy Resources
Fuel and energy resources were employed by Aurizon in a considerable scale for running of
train and other locomotives. Developments were brought about in the designing of trains for
helping in enhancing the efficiency levels of fuel and energy consumption (Aurizon Holdings
Limited , 2016).

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Other Factors
Aurizon Limited continues its freight operations through the involvement of needed
infrastructure, technology, land, plant and equipments and also machineries that amount to
potential production factors for the company. It also consists of telecommunication resources
with computers and other signaling systems.
Grouping of Factors of Production
The manpower resources, fuel and energy resources and trains and locomotives employed by
the organization are identified to be variable factors such that the cost associated with
employing the same tends to increase with growth of production and sales. On the other hand,
the cost associated to building and machinery and plant and other types of equipments held
by the institution are identified to ideally constitute the fixed cost for the organization. The
costs associated with such factors do not increase or decrease with the increase in the level of
production and sales (Harris, 2014).
Overall Cost Structure of Aurizon’s Business
The analysis of the overall cost structure of Aurizon reflects that the company has large
amount of fixed factors compared to variable factors of production. The existence of larger
amount of fixed costs compared to variable costs potentially reflect that the company tends to
gain on greater profits and margins in periods where increased freight services are rendered
by the organization. In cases however, with lower production of services the margin and
profitability of Aurizon tend to get affected. The higher profits and margins are gained by
Aurizon during periods of high productivity owing to the fact that fixed costs tends to remain
the same and are not affected by growth in level of operations. It also reflects that Aurizon is
a larger organization in terms of size.
Macro Business Environment of Aurizon
Political Situation
The existence of political stability in Australia with also the presence of an effective
regulatory system rightly encourages the formation and growth of business enterprises in the