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Essay on the Brainchild of Elon Musk

Updated September 14, 2022
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Essay on the Brainchild of Elon Musk essay

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Company BackgroundSpaceX is the brainchild of serial entrepreneur and business magnate, Elon Musk. Elon Musk is most notably known for his founding of Tesla Motors, and X.com, the precursor to PayPal. SpaceX was founded in 2002 in order to “regain public interest in space exploration”, as says its founder. It was Elon Musk’s idea that a radical innovation in the commercial rocket industry would reignite the public interest to levels liken to those in the late 1960’s. Though, Elon Musk’s ultimate goal of expanding the human race beyond the limits of Earth to become a true spacefaring civilization seems like a hefty task, SpaceX has made numerous revolutionary innovations in the commercial rocket industry along the way.

Product FamiliesFalcon Launch Vehicles: the Falcon Rocket Family consists of 3 variations of multi-use rocket launch vehicles known proverbially as Falcon I (now retired), Falcon 9, and Falcon Heavy. What separates these vehicles from those of other firms is their reusability. When a Falcon vehicle is launched, upon separation, the first stage of the rocket is safely returned to earth in order be used in future launches. This has dramatically decreased the cost of relaunch by no longer required the manufacture of a completely new rocket. The Falcon family has brought in more than $4 billion in contracts and has over 40 launches in its manifest, which accounts for more than 60% of the market.Falcon 9 The Falcon 9 is mainly utilized to launch satellites into low-earth orbit. With a weight capacity of 50,300lbs, the Falcon 9 has been used by NASA, in conjunction with SpaceX’s Dragon Capsule, in order to launch restock missions to the International Space Station. The Falcon 9 is SpaceX’s most versatile rocket, combining both capacity and cost advantage. The cost per launch for the Falcon 9 is approximately $61.2 million.

According to Fortune.com, this is nearly 40% lower than the competition.Falcon HeavyWith a weight capacity of nearly 141,000 pounds, the Falcon Heavy Rocket is the largest commercial rocket available in the market, nearly doubling the capacity of its closest competitor. The main purpose of these vehicles is to attract lucrative military contracts. The Falcon Heavy goes for $80-125 million depending on the weight of cargo being launched. The only other rocket with these capabilities, provided by United Launch Alliance, costs an astounding $350 million, according to ArsTechnica. SpaceX’s cost leadership in this department affords them a great deal of competitive advantage in the heavy launch industry.Dragon CapsulesThe Dragon capsules are most notable as being the first private spacecraft to restock the International Space Station. The Dragon capsules have a carrying capacity of nearly 14,000 pounds yet their most impressive feature is their ability to carry humans. The capsules from the very beginning were designed to bring individuals into space, though to-date, none have been along for a journey to space. Dragon capsules are fitted to either the Falcon 9 or Falcon heavy rockets in order to reach orbit.

Therefore the cost is not based per launch, but per seat. The estimated cost to launch a single individual into space is about $60 million. This is compared to the closest alternative, the Russian Soyuz, which fetches $75 million per seat.Commercial Rocket Industry The commercial rocket industry is a relatively new market that has become appealing to entrants and investors. The companies that share a piece of the industry all have common missions and purposes: To develop the best space transportation on the market in order for humans to be able to use it travel to other planets. This industry does not have a plethora of competitors like many others, but each company in it comes up with unique ways to try to achieve a competitive advantage. The best way to look at the industry as a whole is to utilize the Porters 5 Forces model in order to capture the whole snapshot. In order to initially penetrate the industry, companies must first bypass the barriers to entry.

The commercial rocket industry has a few characteristics that make its barriers to entry rated at a high level. The initial investment that companies have to make in order to even begin building commercial rockets is huge. This is a multibillion dollar industry, and SpaceX alone in its first 10 years of existence had to raise over 1 Billion dollars to fund their projects. Having to receive this type of funding to compete definitely hinders many companies from every being able to grasp a piece of the market share. Funding can come from angel investors, banks, and even government entities such as NASA. SpaceX and NASA have partnered and some of their projects are funded by NASA. With these partnerships already in place, it could be hard to overcome for a new entrant.

Additionally, in a highly technical and expensive field like the commercial rocket industry, top tier talent and knowledge is required for employment in order to succeed. These types of people are few and far between and will require large amounts of money to acquire and retain. A final explanation for the entrance barriers being high in the commercial rocket industry is regulations. Any time you are dealing with air travel, especially going into space and potentially other planets, there are many rules and regulations that a company is required to abide by. Therefore, some ideas and projects can be completely shut down or ruled out because it does not meet a regulation whether that be safety or environmental. The competition in the commercial rocket industry is medium. There are a handful of space travel companies but because of some barriers there is not an abundant amount. The field in which they compete in is more for differentiation rather than cost leadership.

These companies are involved in what is commonly known as a modern “Race to Space”, and many people would be willing to spend whatever it takes to experience commercial space travel. Because of this, the competition revolves around differentiating space travel from another company in order to be the first one to offer this service. The threat of substitutes in a highly specialized field such as commercial rockets will always be evolving. As of right now however, there is not any substitutes on the market. Therefore the threat of substitution in the commercial rocket industry is low. As technology changes and professionals gain more knowledge other companies may be able to offer a substitute (such as the United Launch Alliance noted in “Competition”), but for right now the level of substitution is very low.

In this niche and expensive market there is not an abounding pool of buyers. However, as mentioned earlier, SpaceX has entered a partnership with NASA in order to gain more funding. Because of this NASA is one of their biggest buyers because they can use some of the rockets that SpaceX produces. However, one reason that could hinder the buyers power and increase it would be the result of price sensitivity. Because of regulations and receiving so much money from government entities the price point for rockets is not always going to stay the same. Legislation could obviously affect this industry in a negative way if funding was cut and the prices soared. If there are many suppliers in the industry that can provide key parts for manufacturing at a low switching cost then the bargaining power of suppliers is low.

However, if there are few suppliers that can provide highly specialized material at the highest standard of quality then the bargaining power will be higher. At SpaceX, which is known for high levels of vertical integration, they build most of their own rocket engines. This can be said for a lot of other competitors in the industry, because there are not many suppliers that create rocket engines for sale. This is why the bargaining power for suppliers in this industry is surprisingly low to moderate, because they only need to provide materials that can be found in many places. These materials can be as common as machines to help the engineers create the rockets, metals used to build them, or electrical components. Some of these materials can end up being specific or required to be of very high quality which is why the bargaining power of suppliers could potentially reach a moderate level. Because of the high barriers to entry that require a large initial cash investment, many people are scared away from this industry.

However, if other companies take the path that SpaceX has paved through government funding and contracts then it might be a little easier to make it into this industry. Once entered into this industry the company, not the consumer or suppliers, have a lot of bargaining power which can help with the profitability. This combined with the lack of substitutes currently available on the market can make the commercial rocket industry appealing for potential entrepreneurs and investors. Competition With the rapid growth and success of Elon Musk’s, SpaceX, various organizations, companies, and entrepreneurs have joined the “new space race.” As it is clear that SpaceX is currently the cost leader in the industry, these hungry competitors have been prompted to invent, commercialize, and produce products that will soon be comparable to SpaceX’s revolutionary rockets. SpaceX’s competitors have been conceived and developed by some of the brightest minds and organizations in the industry. To stay ahead in the new space race, SpaceX must continue to develop and innovate as their competitors are developing new technologies.

Now, let us take a look at some of SpaceX’s rising competitors as well as what they are doing within the industry to stay relevant. ULA United Launch Alliance The first competitor that we would like to highlight is an organization called United Launch Alliance. United Launch Alliance (ULA, for short) was founded in 2006 by aerospace industry giants, Boeing and Lockheed Martin. The ULA website boasts an impressive 100% mission success rate among their four rockets: Atlas V, Delta II, Delta IV, and Vulcan Centaur. These missions consist of launching satellites into orbit, “that provide critical capabilities for troops in the field, aid meteorologists in tracking severe weather, enable personal device-based GPS navigation and unlock the mysteries of our solar system. Since ULA was formed, our rockets have placed more than $70 billion of satellite assets into orbit,” according to the ULA website (Missions). When contracted to launch large payloads, ULA is currently using their Delta IV Heavy to launch these sizeable payloads at about 50,000lbs. It is currently quite expensive to utilize this system as it costs $350M per launch for the Delta IV Heavy (Mosher, Dave).

ULA’s Delta IV Heavy is dwarfed in comparison to SpaceX’s Falcon Heavy, with the ability to launch almost 150,000lbs of payload to orbit at $90M, less than a third of the cost to launch ULA’s Delta IV Heavy (Capabilities & Services). The Falcon Heavy will provide even more opportunity for SpaceX in the near future as it is in the process of becoming certified to carry out military objectives (Erwin, Sandra). If this certification is approved, it may prove to be even more of a valuable asset to SpaceX and will inspire even more competition to commercialize the industry. ULA will need to consider research and development programs to compete with SpaceX’s sheer capability and cost effectiveness. Arianespace Another competitor that SpaceX needs to keep an eye on is Arianespace, which is owned and controlled by Arianegroup. Arianespace was founded in 1980, years before SpaceX even became a player within this industry, and is headquartered in France.

Similar to ULA, they boast impressive statistics including the launch and delivery of 550+ satellites (Company Profile). Their current launch vehicles include the Ariane 5, Soyuz, Vega, Vega C, and the unreleased Ariane 6. The latter of these rockets, the Ariane 6, is an upcoming project that is set to release in 2020. This project could be a response to SpaceX’s utter force and momentum in the industry. The Ariane 6 will build off of the current success of the Ariane 5 and will aim to continue that success while decreasing costs of the operation (de Selding, Peter B.) As stated by Arianespace’s managing Director, Richard Bowles, “It’s quite clear there’s a very significant challenge coming from SpaceX, therefore things have to change … and the whole European industry is being restructured, consolidated, rationalised and streamlined” (Ramli, David).

SpaceX is acting as one of largest disruptors in the industry, as we can see from statements such as Richard Bowles’ above, and are forcing their competitors and existing players to reconsider and reorganize business models; namely cutting costs while maintaining services and launch capabilities in an attempt at commercialization. Blue Origin The final competitor that we would like to bring to the reader’s attention is Blue Origin. Blue Origin was founded and is currently owned by Jeff Bezos, the founder of Amazon.com. Blue Origin is a very intriguing company as its purpose and goals are slightly different than that of other competitors. In a 2011 interview, Bezos highlighted that his mission for Blue Origin was to revolutionize the way that we are able to send humans into space, by decreasing costs as well as increasing the safety of the operations (Levy, Steven).

Essentially, Bezos has a desire to turn spaceflight capability into a form of tourism, so that one day it may be available to all at an affordable price. While other players in this industry may have the desire to do this as well, many of them are also focusing on sending satellites, military craft, etc., which is slightly different to Bezos’ mission, as mentioned previously. Blue Origin also utilizes various vehicles and engines. Blue Origin and ULA are both involved in the BE-4 engine, and are funding the research and production of this engine together. ULA is set to use this engine in their upcoming Vulcan spacecraft (Engines). Blue Origin’s primary spacecraft is the New Shepard, with the intent to provide consumers the opportunity to observe the earth and space, in an unprecedented manner. The New Shepard will launch and accommodate six passengers allowing them to view the earth and space with 42.7 inch windows (the largest in aerospace industry, including airliners), in a zero-gravity environment.

At the appropriate moment, the capsule will separate from the booster, and provide the viewing experience. The booster as well as the capsule both return to earth allowing the capability of reuse (New Shepard). Jeff Bezos’ vision and mission are climbing closer to fruition, and may soon enable passengers to enjoy the glory of space in the near future. Although we only mentioned three competitors among the aerospace industry, there are other players that have certainly, and continue to, produce innovative technology. The three organizations mentioned were chosen because they offer a similar strategy and innovation to SpaceX, although not identical. These organizations are undoubtedly contributing a vast amount of effort and contribution to the industry, along with other competitors who are involved in undertakings of a similar fashion. Business ModelValue Proposition SpaceX’s value comes from two key aspects, accessibility and performance.

From the very beginning, Musk believed that the only way to expand humanity’s horizon was to provide access to commercial rocketry. This idea came in the for of low-cost, reusable launch vehicles. By drastically reducing the capital needed to reach the final frontier, SpaceX has incentivized new companies to reach even greater height. Given the reduction of price, naturally comes the question of quality. The need to provide a high-quality alternative to the existing products was evident. In order to provide this, SpaceX has been recruiting top engineers to ensure the quality of their vehicles. SpaceX can quite easily be seen as a research and development firm that moonlights as a rocket company. Elon Musk asserts that simplicity is necessary to keep costs low and reliability high.

Revenue Building Much of SpaceX’s revenue comes by way of contract. Under these contracts, contractors agree to pay SpaceX a fixed-value in order for them to provide a set number of launches. SpaceX’s three main customers are U.S. space agencies, foreign space agencies, and commercial space companies. Being a private company, access to SpaceX’s financial information is a tedious, often, incomplete process. What is known is that their largest contractor is the United States Government, mainly through the conduct of NASA. Beyond that, much of SpaceX’s clients are satellite communications companies such as Iridium. Reinvestment Strategy According to many sources, SpaceX has received incredible profit since as early as 2010. SpaceX’s strategy is to reinvest nearly every penny back into the company to expand research and development to ensure their dominance in the marketplace. With the economy changing rapidly, innovation is a major factor in our society as well as SpaceX. They have taken rocket engine technology to the next level. Other companies will soon attempt to replicate their ideas/inventions due to the fact that SpaceX has no patents. It is SpaceX’s job to innovate and beat the market toward its ultimate goal of air and space travel.

Vertical integration SpaceX is unique in their industry in that they are heavily vertically integrated. SpaceX designs, develops, and manufacturers all their products in a single warehouse. They are involved in every step of the process by keeping all inputs in-house. This vertical integration increase their control over the quality of their products while keeping scarce resources out of the hands of their competitors. SpaceX controls every step of their value chain, which grants them a great deal of cost control by reducing expenses such as transfer costs, mark-ups, and other fees.Patents Currently, SpaceX does not file any patents for any of their products or processes. This is done in order to keep key trade secrets out of the hands of their competitors. When a patent is filed, often the information is used by competitors as a means to steer their own research, while knowing exactly how to avoid infringing on the design. By not filing, SpaceX is safeguarding their core competencies in order to sustain their competitive advantage. With all of Elon’s intellectual property, you would think he would want his property protected.

However Elon Musk said, “We have essentially no patents in SpaceX. Our primary long-term competition is in China. If we published patents, it would be farcical, because the Chinese would just use them as a recipe book.” The reason he says this is because there are plenty of holes in patent law, especially when it comes to international patent law. Threats and Concerns:SafetySpaceX has become very successful in the past decade and that is due to their innovation. Elon Musk had a vision to implement the Dragon capsule, which is designed to ferry astronauts to orbit. They had initially planned on routinely using the private spacecraft to ferry astronauts last year but this has now been pushed back to at least the spring of 2019 due to unresolved hazards. The risks to these astronauts include unconventional rocket fuel systems and anticipated bombardment of spacecraft by tiny meteor fragments as well as other space debris. NASA has calculated the statistical probability of a fatal accident and determined this would happen no more than 1 time per 270 flights. With debris being one of the major concerns, SpaceX has come up with way to eliminate some of this junk.

The debris sizes can range from defunct satellites to astronaut’s gloves and those are all orbiting the Earth. U.K.’s Surrey Space Centre is sending Remove Debris into space. The device is just what it sounds like, it is a cost effective solution for the removal of space junk. SpaceX believes this will help release the Dragon capsule sooner than later. Fueling ProcessWith the ultimate goal to have private rockets for space travel, an agency panel is still worried about the fueling methods that SpaceX uses. They use a method called the “load-and-go” fueling process. The process involves fueling of super-chilled liquid oxygen after the astronauts have already boarded the spacecraft. Fueling the rocket after everyone boards ensures that the fuel will be kept as cold as possible and this occurs thirty minutes before launch. In a normal spacecraft the fueling occurs before a crew is even on board. Due to the disasters that happened to the Challenger and Columbia, NASA has become very sensitive to safety concerns.

This issue was brought attention when the Falcon 9 rocket exploded on the pad prior to a static-fire test. “There is a unanimous, and strong, feeling by the committee that scheduling the crew to be on board the Dragon spacecraft prior to loading oxidizer into the rocket is contrary to booster safety criteria that has been in place for over 50 years, both in this country and internationally,” Stafford wrote in the letter, which NASA released in November. (Space News) NASA is worried that if another disaster happens not only will it result in fatalities but it can also eliminate future public-private manned space travel partnerships.

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