Virgin Galactic has planned to launch its LauncherOne aircraft which will help the Planetary Resources to explore and develop valuable resources from asteroids. The LauncherOne will have capability to make various journeys into the Space every year. Virgin Galactic has also planned to start human flights to the moon in the near future. While this strategy can give it the first mover advantage in the industry, the risks and issues present in the Space business can also pose it big challenges and affect its operational and financial performance in the long run.
The purpose of this paper is to analyze and discuss this innovative strategy of the company from different perspectives. It starts with a brief introduction to the aerospace industry, the strategic decision of Virgin Galactic, and the vision, mission, and other key attributes of this decision. The main body of the paper comprises of comprehensive industry analysis; including market dynamics, financial aspects, technological and human resource planning needs, current and potential market size, potential opportunities in the space business, risks associated with the space business, and different types of logistics issues for the company. The major focus of the paper is towards discussing the effectiveness of this innovative strategy for the long-term growth and market share of the company.
The companies operating in the aerospace industry design, manufacture, sell, and maintain different types of vehicles that fly through air and space. The major customers for air and space vehicles include airline companies, aerospace research organizations, and military or defense corporations (Cadogan 2011). The airlines companies purchase aircrafts and aero planes that are used as the fastest transportation medium by the general customers while the aerospace research organizations use them for doing research in the Space and the Universe. Aerospace industry is operated by firms from both public and private sector. However, the major market share is taken by the private sector in most of the countries. Some private sector companies also operate through funding arrangements by other companies (Commission on the Future of the U.S. Aerospace Industry 2012).
Virgin Galactic is a limited liability large scale corporation mainly engaged in the manufacturing processes and maintenance services of all types of spacecrafts. It is one of the most advanced aerospace corporations in the industry that has planned to launch human flights into the Space in the future. The company has a strong customer base with some renowned space research organizations as its prime customers from the private sector. Virgin Galactic is a subsidiary of the Virgin Group and is currently headquartered in Las Cruces, United States (Virgin Galactic 2012). The LauncherOne is one of the most advanced aircrafts manufactured by Virgin Galactic which is capable of flying through Space at an astonishing speed. There are certain objectives associated with this launch which makes it a very important strategic decision by the company.
THE VISION, MISSION, AND STARTEGY OF VIRGIN GALACTIC
Through its innovative strategy and transformational technologies, Virgin Galactic aims to achieve new milestones in the aerospace industry. With the help of private sector investments and collaborative arrangements with the world's most renowned aerospace corporations, Virgin Galactic has strategized to offer the most advanced, reliable, and super fast spacecrafts in the future which will help it to become the number one aerospace corporation in the world market. Virgin Galactic has set a road map to achieve this mission through its new innovative strategy. Through this strategy, the company wants to become the very first low orbital commercial airline provider in the world. In addition, Virgin Galactic also aims to launch sub-orbital launches for small satellites for space research institutions from both public and private sector.
The vision of Virgin Galactic is to reach at the top market position in the aerospace industry of the world by providing the most demanded air and spacecrafts. The recent collaboration of Virgin Galactic with Planetary Resources will give various strategic benefits to both the firms (Virgin Galactic 2012). Virgin Galactic will launch its LauncherOne aircraft which is capable of making a number of flights every year while Planetary Resources will get a reliable aircraft to discover the unexplored secrets of the asteroids. The strategic objectives behind this launch and innovative strategy are to explore the hidden secrets of the Space with the help of advanced aircrafts and communication networks.
Potential Industry segments:
The industry segments where Virgin Galactic can play with its innovative strategy include spacecrafts for human flights, communication networks through large satellites, launch of small satellites for private businesses, and super-fast spacecrafts for Space research organizations. The most potential area for this innovative strategy is the human flights to moon which aeronautical engineers and scientists believe to be the 'Industry of the Future' (Virgin Galactic 2012). Virgin Galactic can invest a big proportion from its budget and retained revenues in this industry segment in order to develop its own market before the competitive pressures create hurdles in its way to success. It can start this line of business in the future from single flight per month at high price to frequent flights per week at affordable price for the general public.
THE FINANCIAL ASPECT
The implementation of new strategy will require a huge investment in Research and Development, technology, communication networks, logistics, human resource planning, and other operational and organizational aspects. Virgin Galactic has planned to launch its LauncherOne in the space in consortium with Planetary Resources. This new project will cost millions of dollars to both the companies. The biggest cost in this project is Research and Development. Virgin Galactic will have to conduct a full fledge analysis of the destination planet in the Space where Planetary Resources wants to mine asteroids. An extensive research is needed on both the sides in order to ensure that the investment done on LauncherOne in this project does not go waste.
The second major cost will be the implementation of advanced technological processes, software, and communication systems in order to get this assignment done in an efficient and reliable fashion (Commission on the Future of the U.S. Aerospace Industry 2012). The implementation of highly advanced communication networks and systems will also require big investment by the company. These initial costs will put a heavy financial burden on the funding company of Virgin Galactic. The initial period of launch will keep the profit margins at their lowest level, but the company will regain its high profitability after the subsequent launches of the same spacecraft in the next few months. The Space business is highly capital intensive which requires its participants to adopt growth strategies for their operations. Therefore, Virgin Galactic will also have to give an equal focus on other operational aspects of its business. For example, it cannot adopt stability strategy for its small satellite manufacturing and operations while LauncherOne operations are in process (Corallo, Laubacher, Margherita, & Turrisi 2009).
THE MARKET DYNAMICS
The aerospace industry has seen a tremendous growth during the last 3 to 5 years. There has been an addition of numerous large scale aerospace manufacturers in the industry while the competition among the existing manufacturers has significantly increased. Virgin Galactic operates in such an industry where the profit margins are very high for businesses. The new entrants, although need extensive research and market analysis, see a rapid growth in their operations. The businesses have to make collaborative arrangements with international businesses in order to improve their manufacturing capabilities and efficiency of operations. The costs of production are very high for spaceships, aero planes, rockets, and all types of aircrafts (Rossetti & Choi 2005). The market share of a company takes positive impact when it makes investment in such an advanced project.
The logistics market in the spaceships and aircraft manufacturing industry has a great potential to grow in the U.S. And European market due to the presence of a large number of aircraft manufacturers and high level of demand for space flights in the public and private sector (Corallo, Laubacher, Margherita, & Turrisi 2009). The supply chain members for this industry are also very few in number which prefer to make long-term relationships with the market leaders of the industry in order to ensure a sustainable future and get a good price for their suppliers and services. Every spaceship and aircraft manufacturing firm gives a major focus on reducing manufacturing costs, quality management, fuel consumption, time to travel, and overall operating costs. Fuel accounts for more than 50% costs for air jets and spaceship manufacturers. The rapid increase in the prices of oil and petroleum products in the world markets has been posing big threats to these aircraft manufacturers (Clear Water Corporate Finance 2010).
Business SIDES RELATED TO PEOPLE, PROCESS, AND TECHNOLOGY
Advanced Technological Processes:
Virgin Galactic, being the first mover in the spaceships manufacturing industry as a privately funded company will have to institute highly advanced technological systems in order to operate, monitor, and control the aircrafts sent in to the Space. The business processes will also need to…