Strategy: Elon Musk's Reusuable Rocket

The following is a step-by-step resource-based analysis on whether Elon Musk’s reusable rockets have a competitive advantage relative to the following competitors—Blue Origin (Blue), Virgin Galactic (Virgin) and United Launch Alliance (United).

Rare? Yes. For a resource or capability to be considered rare, the company generally only competes with one other organization in the market that does the exact same thing and just as well. Space X passes the rare portion because:

Virgin’s SS2 commercial space operations are impeded by troubles with launching and completing its test/development program. Issues with Virgin spilled into the media with reports that the company is over promising and underdelivering on progress updates and objectives. Meanwhile, United’s CEO, Tony Bruno, downplayed potential returns of reusable rockets. According to Bruno, salvaging rockets is “not necessarily a giant game changing alteration to the cost basis.” Finally, that leaves one viable competitor, so the rare test passes.

Durable? Yes. To be considered durable, Space X must capitalize on three aspects—time, money and desire. Space X meets the durable requirement for several reasons. First, United does not currently desire reusable rocket development and they are light years behind Space X in terms of developing, testing and matching or exceeding Space X’s current competitive positioning. Despite having the resources to develop reusable rockets, timing and desire are two critical constraints for United.

Second, Virgin’s unsuccessful launches have not proven to be strong enough to mount a credible challenge to Space X now. Space X surpassed Virgin in launching and landing reusable rockets.

Relatively nonsubstitutable? Yes. Although this isn’t so cut and dried. To label a good nonsubstitutable, we must empathize with customers to explore alternatives offered outside those offered by competitors mentioned at the top of this page. For customers, such as NASA, the best alternative to reusable rockets is the status quo—non-reusable rockets. For end customers or private citizens considering space travel, a viable alternative to space travel might be no space travel. These customers may decide to pursue some thrill-seeking activity instead. However, Space X seems to be best positioned to enter this new market and possibly obtain a monopoly for some time. If forced into whether this is substitutable or nonsubstitutable, I would say that Space X is relatively substitutable given non-reusable rocket options and forgoing space travel.

Relatively nontradable? Yes. Tradability refers to the ability of competitors to obtain reusable rockets from Space X. Space X has that ability because it’s theirs to sell if they so choose.

Valuable? Yes. Space X calculates that tremendous cost savings as a result of reusable rockets. By producing more rockets, especially at a time when there aren't many viable competitors in the market, Space X is able to capitalize on the trifecta-- the ability to charge more, have it cost them less and draw in new customers they never had.


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© 2018 by Benjamin B. Bowman 

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