The importance of satellite-based technology in human’s daily lives and military convention hardware is indispensable. Space stations and satellite telescopes help people explore space and understand it better, while rockets and space vehicles help transport people and cargo to space. Without them, space exploration would be a pipe dream. Yet, universe exploration is needed to open up space for more potentials and activities that improve other technologies' performance. Consequently, highly developed space technologies are necessary to make possible many space activities and lower the cost of such undertakings.
Meanwhile, rockets and space stations are increasingly becoming privatized, with countries and companies both small and large competing to have a position in the suborbital track. Experts see this as something good as these resources' privatization will open up suborbital space to nations, businesses, and even individuals. These developments have seen the space industry grow exponentially, with more and more companies coming in to maximize the opportunity for commercial gains. Space Exploration Technologies Corporation is one such company. The company has made headlines due to its nerve tracking contributions and milestones in the space industry and is currently the market leader.
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Background and history of Space Exploration Technologies Corporation
Popularly known as SpaceX, the aerospace company was founded in 2002 by space enthusiast Elon Reeve Musk. He was born on June 28, 1971, to a South African family in Pretoria, South Africa. Right from childhood, his love for technology and innovation was evident when at just 12 years old, he developed and sold his first software, a game called Blastar (Weinberger & Hartmans, 2020). The University of Pennsylvania, a Bachelor of physics and economics graduate, worked on an experimental greenhouse that he intended to land on Mars in 2001. His efforts to acquire an International Ballistic Missile from Russia to accomplish his project proved futile since the spaceflights were very expensive. This turn of events, coupled with his passion for ferrying people to space with a vision of colonizing it, inspired him to devise cheaper transportation to enhance space exploration. Thus SpaceX was born (Chang, 2016). The company envisioned making spaceflight less expensive by a factor of 10 (Weinberger & Hartmans, 2020). Elon incorporated the company in El Segundo, California, on May 6, 2002, but later relocated its headquarters to Hawthorne, California, searching for a more spacious warehouse where it is based to date.
Background and history of Space Exploration Technologies Corporation
SpaceX has proliferated in every aspect to become the industry leader in just over two decades. Barely three years after its creation, the company acquired a stake in Surrey Satellite Technology, a manufacturer and operator of small satellites (Brown et al., 2007). By 2012, the business had grown its equity value to $1.3 billion (Brown et al., 2007), up from the $100 million capital on which Elon started it (Weinberger & Hartmans, 2020). Today, the business is worth $36 billion in shareholder wealth and makes billions of dollars in annual revenue, with over 100 launches representing about US$12 billion in contract revenue (Thiel, 2020). SpaceX boasts several achievements, including being the first private company to launch successfully, orbit, recover a spacecraft, build the first privately funded liquid-propellant rocket to reach orbit, and be the first private company to send a spacecraft to the International Space Station (Mann, 2020). Its other achievements include being the first private company to launch an object into orbit around the Sun, the first private company to send astronauts to orbit and to the International Space Station, the first reuse of an orbital rocket, and the first Vertical take-off and vertical propulsive landing for an orbital rocket (Spaceflight Now, 2020). The company’s workforce has also grown tremendously, from 168 employees in 2005 to 8,000 by May 2020 (Thiel, 2020). It has done exceptionally well, having moved from an underdog to dominate the industry, overtaking traditional industry players such as Space Services Inc. Today, it is almost impossible to speak about the space industry without mentioning SpaceX.
SpaceX Business Model
a. Revenue stream and customer segment
Unlike other industry players such as Boeing and Lockheed Martin, SpaceX is a private company, and its business is not publicly available. However, this study established that the company has a single revenue stream: the sale of the merchandise it manufactures, including satellites and rockets. Its business model mainly involves designing, manufacturing, and launching rockets and satellites as the main business activities (Tartar & Qiu, 2018). The company’s main business partners are the over 3000 suppliers who provide it with parts for spacecraft manufacturing, with some making weekly conveyances. SpaceX deals in specialized spaceflight products such as government national security missions and commercial satellite launchers. Consequently, it has a specialized client segment, hence a niche business model (Tartar & Qiu, 2018). Some of its specific clients include the United States Airforce, OrbComm, and MDA Corporation (Tartar & Qiu, 2018). The company also markets its products and services to private and public institutions that need to ferry cargo to space. The company has a business development team tasked with identifying customer leads through which it acquires most of its clients. The team, which is the company's main channel, is responsible for promoting its offerings on its website and social media platforms.
b. Value proposition and cost structure
The company’s primary value propositions are accessibility, performance, and brand. It creates accessibility by providing transport opportunities for organizations and individuals seeking to explore the space. The company works closely with clients to oversees the launch, orbiting, and recovery of spacecraft. It considers client relationships to be of crucial significance and is committed to maintaining close relationships with each one of them. The business's relationship with its clients is one of primarily dedicated personal assistance. It has established itself and become well-known as the first private company to engage in space exploration actively. Besides, the company's CEO and founder Elon Musk is a reputable and high-profile entrepreneur, and his association with SpaceX contributes to raising the company's profile. It has a value-driven-cost structure, aiming to provide an excellent proposition through huge individual help and regular product upgrades. Its most significant cost drivers are likely the expense of merchandise as the variable cost, and research/development and sales/marketing as the fixed costs. SpaceX has a scheduled launch of its sixteenth Starlink mission, which is expected to bring its revenue by providing satellite Internet services across the globe (SpaceX, 2020). The company expects Starlink to serve up to 5% of the population, translating into $32 billion per year (SpaceX, 2020). Until that happens, the company’s current revenue model is commercial and government launches of payloads into space.
The key elements that are helping SpaceX to succeed
Innovation: One element that has been at the center of SpaceX’s enviable success is its innovation. In a 2018 conference in Vancouver, the company’s COO Gwynne Shotwell went on record, saying that part of its success has been its innovation and ability to develop rockets from scratch without following any predetermined technology (Berke, 2018). According to the COO, as quoted by the publication, their engineers keep track of the industry’s latest developments and pick only the "best ideas and leverage them without having to design around "legacy components that maybe weren't the most reliable or were particularly expensive" (Berke, 2018, par.8). They operate based on having “a big goal, learning from the past, looking at the whole picture to find and prioritize opportunities, then refining critical aspects of the space flight model to achieve their objective” (Agan, 2013. An example is the architecture of Falcon Heavy's fuel tank. Besides building the tank in the common dome design, SpaceX’s engineers designed it to shave a lot of weight off the system, thereby “taking more payload for the same design” (Berke, 2018, par.11). Through being innovative, the company manages to develop the best products not built after other designs but designed to fit the latest industry needs, giving it a selling advantage over its competitors.
Pricing strategy: The main goal of SpaceX right from its inception was to lower the costs of space transportation and reduce barriers to space. Its pricing has since been value-driven, with a focus on frequent product enhancements. Leveraging on its innovative capabilities, the organization combines old ways that worked with new methods that have the potential to dramatically reduce costs, enabling it to price their products reasonably. Besides, the company’s main drive is not the desire to increase profits but the need to make space exploration viable through cost reduction (Agan, 2013. While its competitors are busy working on heavy rockets to achieve economies of scale, SpaceX invests in smaller spacecraft that sell for as little as $250,000 (Tartar & Qiu, 2018). Due to fair pricing, it has a legacy of building the most affordable rockets, which gives it a competitive edge over the rest of the market players.
Technology : The company leverages some of the best and latest technology. Consequently, it was the first aerospace company to successfully launch, orbit, and recover a spacecraft (Ralph, 2020). In its latest strategy, SpaceX adopted a rideshare program for small satellites to conduct regular launches (Agan, 2013. Furthermore, the tech giant boast of being the first to reuse an orbital rocket (Spaceflight Now, 2020). Its leading role in the use of technology has enabled it to reuse parts or the whole of its missiles (Sheetz, 2020). So far, it has been able to recover two significant pieces of its rockets. Reusing rockets saves the organization a lot of money, and according to Sheetz (2020), the company has said it can charge even less than its list price when it reuses parts of its rocket. SpaceX is so far the cheapest in the market, and anything that will enable it to charge even lower costs makes it completely unmatched by other industry players.
To sum up, SpaceX has made significant milestones during its two decades of operation. The company's success story is one that befits the description "extraordinary revolution." Starting from scratch and rising quickly to overtake established industry players in just a decade is commendable. What is more, the company has revolutionized the industry by making space transportation more affordable and setting a record in the reuse of orbital-class launch vehicles. As a private company, lowering the launch costs with limited space activities for decades is such a milestone. Since the launch of satellite-based technology in the mid-90s, the unaffordability of space shuttles and programs has traditionally put it beyond the rich of most nations. With the privatization of rockets and space stations by companies like SpaceX, access to space continues to be opened up to states, organizations, and individuals alike. Whereas other states and private companies such as Space Services Inc., Boeing, Jeff Bezos’s Blue Origin, United Launch Alliance, and more providing launch services, SpaceX has emerged as the most significant player in the sector.
References
Agan, T. (2013). What SpaceX can teach us about cost innovation . Harvard Business Review. Retrieved November 22, 2020, from https://hbr.org/2013/04/what-spacex-can-teach-us-about
Brown, M. B., Frampton, D., & Somerville, T. (2007). Surrey satellite technology limited sells stake to Spacex . Wayback Machine. Retrieved November 22, 2020, from https://web.archive.org/web/20130126130553/www.spacex.com/press.php?page=13
Sheetz, M. (2020). Elon Musk touts low cost to ensure SpaceX rockets as an edge over competitors . CNBC. https://www.cnbc.com/2020/04/16/elon-musk-spacex-falcon-9-rocket-over-a-million-dollars-less-to-insure.html
Spaceflight Now. (, 2020). Launch schedule . Retrieved November 22, 2020, from https://spaceflightnow.com/launch-schedule/
SpaceX. (, 2020). Starlink mission . SpaceX. Retrieved November 22, 2020, from https://www.spacex.com/launches/#:~:text=SpaceX%20is%20targeting%20Sunday%2C%20November,UTC%20on%20Monday%2C%20November%2023
Weinberger, M., & Hartmans, A. (2020). How billionaire Tesla and SpaceX CEO Elon Musk went from getting bullied as a child to becoming one of the most successful and controversial men in tech . Business Insider. Retrieved November 22, 2020, from https://www.businessinsider.com/the-rise-of-elon-musk-2016-7#in-1983-at-the-age-of-12-musk-sold-a-simple-game-called-blastar-to-a-computer-magazine-for-500-musk-described-it-as-a-trivial-game-but-better-than-flappy-bird-4
Berke, J. (2018). SpaceX's president revealed a critical element that has made Elon Musk's rocket company so successful . Business Insider. Retrieved November 22, 2020, from https://www.businessinsider.com/spacex-president-ted-2018-4
Chang, K. (2016). Elon Musk’s Plan: Get Humans to Mars, and Beyond . Retrieved November 22, 2020, from https://www.nytimes.com/2016/09/28/science/elon-musk-spacex-mars-exploration.html
Mann, A. (2020). SpaceX now dominates rocket flight, bringing significant benefits—and risks—to NASA . Science | AAAS. Retrieved November 22, 2020, from https://www.sciencemag.org/news/2020/05/spacex-now-dominates-rocket-flight-bringing-big-benefits-and-risks-nasa
Ralph, E. (2020). SpaceX's 99th Falcon launch checks off the new rocket booster reuse record . TESLARATI. Retrieved November 22, 2020, from https://www.teslarati.com/spacex-100th-launch-rocket-reuse-milestone/v
Tartar, A., & Qiu, Y. (2018). The New Rockets Racing to Make Space Affordable . Bloomberg. Retrieved November 22, 2020, from https://www.bloomberg.com/graphics/2018-rocket-cost/
Thiel, P. (2020). Elon Musk . Forbes. Retrieved November 22, 2020, from https://www.forbes.com/profile/elon-musk/?sh=1781c9967999
