Space Tourism MBA Dissertation

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This is my MBA dissertation from 2006. I worked with a UK based space tourism company called Starchaser Industries to help them develop a business plan to enter this new and exciting industry sector. I included extensive competitive analysis with Virgin Galactic who 8 years later are about to launch their own service in late 2014. I undertook extensive surveys to get public reaction to private space tourism launches and looked at whether there was scope to launch a sounding rocket business for placing small payloads into low earth orbit. Even though Starchaser has struggled in recent years to raise the capital they need to succeed with the project it proved to be a worthwhile project for myself to understand what it would take to try and launch a new business in a totally new industry sector. Please feel free to down this dissertation.

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Space Tourism MBA Dissertation

  1. 1. Executive MBA Dissertation “Establishing a Low Cost Sub-Orbital Space Business in the UK” Submitted by: Mark Morley, 0262185 Submitted on: 10th February 2006 A Dissertation submitted in part-fulfilment of the requirements for the Degree of Master of Business Administration of the University of Warwick “All the work contained within is my own unaided effort and conforms with the University’s guidelines on plagiarism” Warwick Business School – Executive Modular MBA Dissertation – 0262185 1
  2. 2. Acknowledgements This dissertation is dedicated to Melanie Carleton-Mills who has provided me with a constant source of inspiration and support throughout the writing of this dissertation. Warwick Business School – Executive Modular MBA Dissertation – 0262185 2
  3. 3. Abstract The purpose of this project is to look at the viability of establishing a low cost sub-orbital space business in the UK. In recent years, most space rocket launches have been conducted by government funded space agencies around the world. These agencies command multi billion dollar budgets to develop space related equipment and launch services. The high cost of accessing these launch services restricts the amount of research that can be conducted by the scientific and university communities. Sub-orbital launch services such as Sounding Rockets provide an ideal low cost, flexible launch platform however a dedicated launch service for UK universities does not currently exist. In recent years, a few high net worth individuals have paid significant amounts of money to fly aboard Russian space craft. These individuals, or Space Tourists, have ignited the general public’s interest in the future potential of the space tourism industry. Once again, high costs and limited launch services will restrict growth of this industry unless a number of nongovernment funded commercial space companies are established and are able to compete in this new and exciting industry sector. This project will undertake research to establish whether a low cost UK space business can be established to address these two market requirements, namely a service for launching scientific based payloads into sub-orbital space and a launch service to meet the needs of the emerging space tourism market. The aim will be to see if this low cost venture can be established without the need for government funding. Warwick Business School – Executive Modular MBA Dissertation – 0262185 3
  4. 4. Table of Contents 1 2 3 4 5 Introduction ...................................................................................................................................... 8 1.1 Background of the study ........................................................................................................ 8 1.2 Project objectives ................................................................................................................. 10 1.3 Methodology ........................................................................................................................ 10 1.4 Organisation of the report .................................................................................................... 11 Industry & Company Review ......................................................................................................... 12 2.1 Introduction .......................................................................................................................... 12 2.2 Review of Today’s Global Space Industry ........................................................................... 12 2.3 Overview to the Sub-Orbital Sounding Rocket Industry ....................................................... 13 2.3.1 Review of the Primary Sounding Rocket Launch Providers ....................................... 16 2.3.1.1 European Based Sounding Rocket Programmes ............................................. 16 2.3.1.2 U.S Based Sounding Rocket Programmes ....................................................... 17 2.3.2 Review of Sounding Rocket Launch Sites .................................................................. 18 2.4 Overview to the Emerging Sub-Orbital Space Tourism Industry .......................................... 20 2.4.1 The Ansari XPRIZE Competition ................................................................................ 21 2.4.2 Current Developments in Low Cost Space Craft Design ............................................ 23 2.4.3 Emergence of Commercial Spaceports ...................................................................... 24 2.5 Review of the UK’s Space Strategy ..................................................................................... 26 2.5.1 Enhancing UK’s standing in astronomy, planetary & environmental science ............. 27 2.5.2 Increased productivity through promoting the UK’s use of space ............................... 27 2.5.3 Developing innovative space technologies that improve quality of life ....................... 27 2.5.4 Size and Health of the UK Space Industry ................................................................. 28 2.5.5 UK Involvement with the ESA Programme ................................................................. 29 2.5.6 UK Micro-Gravity Activities ......................................................................................... 29 2.6 An Overview of Starchaser Industries .................................................................................. 30 2.7 Summary ............................................................................................................................. 33 Review of Literature....................................................................................................................... 34 3.1 Introduction .......................................................................................................................... 34 3.2 Review of the Sounding Rocket Market Sector .................................................................... 34 3.2.1 Microgravity & Sounding Rocket Industry Analysis .................................................... 34 3.2.2 UK Microgravity Research Policy ............................................................................... 36 3.2.3 Review of Starchaser’s Sounding Rocket Programme ............................................... 39 3.3 Review of the Space Tourism Market Sector ....................................................................... 42 3.3.1 Sub-Orbital Space Tourism Industry Analysis ............................................................ 44 3.3.2 Competitive Analysis of the Space Tourism Market ................................................... 45 3.3.2.1 SWOT Analysis of Virgin Galactic & Starchaser ............................................... 47 3.3.3 Estimating Market Demand for Space Tourism Services ........................................... 48 3.3.4 Financial Investment Issues Associated With Space Tourism.................................... 50 3.4 Review of Starchaser’s Current Business Strategy.............................................................. 53 3.4.1 Company Strategy ...................................................................................................... 53 3.4.2 Marketing Strategy ..................................................................................................... 59 3.5 Summary ............................................................................................................................. 64 Discussion ..................................................................................................................................... 65 4.1 Introduction .......................................................................................................................... 65 4.2 General Review of the Sounding Rocket Industry............................................................... 65 4.2.1 Can Starchaser Compete in the Sounding Rocket Market? ....................................... 66 4.3 Analysis of the Results from the Sounding Rocket Survey .................................................. 67 4.3.1 Review of Survey Methodology .................................................................................. 67 4.3.2 Discussion of the Results Obtained ............................................................................ 67 4.4 General Review of the Space Tourism Market.................................................................... 71 4.4.1 Can Starchaser Compete in the Space Tourism Market ? ......................................... 72 4.4.2 Increased Media Interest in the Space Tourism Industry ........................................... 72 4.5 Analysis of the Results from the Space Tourism Survey ..................................................... 73 4.5.1 Review of Survey Methodology .................................................................................. 73 4.5.2 Discussion of the Results Obtained ............................................................................ 73 4.6 Summary ............................................................................................................................. 79 Proposed Strategy ......................................................................................................................... 80 5.1 Introduction .......................................................................................................................... 80 5.2 Proposed Sounding Rocket Market Strategies .................................................................... 80 5.3 Proposed Sub-Orbital Space Tourism Market Strategies .................................................... 81 5.4 Proposed Company Strategies ............................................................................................ 82 Warwick Business School – Executive Modular MBA Dissertation – 0262185 4
  5. 5. 5.5 Summary ............................................................................................................................. 83 Conclusions ................................................................................................................................... 84 6.1 Introduction .......................................................................................................................... 84 6.2 Major Recommendations ..................................................................................................... 84 6.3 Limitations of the study ........................................................................................................ 85 6.4 Future research directions ................................................................................................... 85 7 References .................................................................................................................................... 86 8 Appendices .................................................................................................................................... 88 6 Warwick Business School – Executive Modular MBA Dissertation – 0262185 5
  6. 6. List of Figures Fig. 1 Comparison of Micro Gravity Launch Methods ................................................................................................. 13 Fig. 2 Typical Configuration for a Sounding Rocket ................................................................................................... 14 Fig. 3 Typical Parabolic Flight Path for a Sounding Rocket ........................................................................................ 14 Fig. 4 Current ESA Supported Sounding Rocket Programmes .................................................................................. 17 Fig. 5 U.S Federal, Non-Federal and Proposed New Spaceports .............................................................................. 19 Fig. 6 SpaceShipOne Space Craft & White Knight Launcher ..................................................................................... 22 Fig. 7 Post XPRIZE Contenders Currently in Business, (See Appendix 8-H) ............................................................ 23 Fig. 8 New Entrants to the Privately Funded Space Industry ..................................................................................... 24 Fig. 9 Global Space Tourism Market Opportunity ....................................................................................................... 25 Fig. 10 Economic Value to New Mexico State ............................................................................................................ 25 Fig. 11 New Mexico Spaceport Business Opportunities ............................................................................................. 26 Fig. 12 Key Users of Satellite Technology / Services ................................................................................................. 27 Fig. 13 The Upstream and Downstream Sectors of the UK Space Industry............................................................... 28 Fig. 14 2003 Turnover by Application, Excluding the Consumer Market .................................................................... 28 Fig. 15 UK Financial Contributions to ESA Programmes ........................................................................................... 29 Fig. 16 Reusable Skybolt Sounding Rocket ............................................................................................................... 31 Fig. 17 ‘Storm’, 7 tonne Bi-Liquid Rocket Engine ....................................................................................................... 32 Fig. 18 Starchaser Range of Rockets ......................................................................................................................... 32 Fig. 19 PEST Analysis of the UK Sounding Rocket Industry ...................................................................................... 35 Fig. 20 Porter’s Five Forces Analysis ......................................................................................................................... 35 Fig. 21 Porter’s Diamond Summary of Potential UK Based Microgravity Industry ..................................................... 38 Fig. 22 SWOT Analysis of Starchaser Industries Sounding Rocket Business ............................................................ 40 Fig. 23 Strategic Focus of Starchaser’s Sounding Rocket Programme ...................................................................... 41 Fig. 24 Competitive Advantage through Product Differentiation ................................................................................. 42 Fig. 25 Space Tourism Market Opportunities by 2030 .............................................................................................. 43 Fig. 26 Sub-Orbital Space Tourism Industry PEST Analysis ...................................................................................... 44 Fig. 27 Sub-Orbital Competitive Positioning Matrix .................................................................................................... 46 Fig. 28 Comparative SWOT Analysis Between Virgin Galactic & Starchaser Industries............................................ 47 Fig. 29 Estimating the Elasticity of the Space Tourism Industry ................................................................................. 48 Fig. 30 Estimated Ticket Demand Based on World Wealth Report ............................................................................ 50 Fig. 31 Key Information Sought by the Investment Community .................................................................................. 52 Fig. 32 M.O.S.T Method of Analysing Business Growth ............................................................................................. 53 Fig. 33 Representation of Starchaser’s Current Business Strategy ........................................................................... 54 Fig. 34 Starchaser’s Project Lifecycle’s ...................................................................................................................... 55 Fig. 35 Seven Domains of Market Attractiveness ....................................................................................................... 56 Fig. 36 Position of Starchaser with Respect to its own Growth .................................................................................. 57 Fig. 37 Metamorphosis of a Company ........................................................................................................................ 58 Fig. 38 Review of Starchaser’s Marketing Activities ................................................................................................... 60 Fig. 39 Starchaser Brand Characteristics ................................................................................................................... 60 Fig. 40 The Characteristics of a Successful Brand ..................................................................................................... 61 Fig. 41 Starchaser’s Old & New Logos ....................................................................................................................... 62 Fig. 42 Virgin Galactic’s New Image ........................................................................................................................... 62 Fig. 43 NOVA Launch Vehicle .................................................................................................................................... 63 Fig. 44 UK Specific Launch Locations ........................................................................................................................ 68 Fig. 45 Average Launch Budget Per Year ................................................................................................................... 69 Fig. 46 Considerations When Choosing a Launch Partner ......................................................................................... 69 Fig. 47 Factors Preventing Market Entry for New Launch Providers .......................................................................... 70 Fig. 48 Age Range and Gender of Space Tourism Survey ........................................................................................ 74 Fig. 49 Awareness of Space Tourism ......................................................................................................................... 74 Fig. 50 Awareness of the Starchaser Brand Name .................................................................................................... 75 Fig. 51 Those Interested in Taking a Sub-Orbital Flight ............................................................................................. 75 Fig. 52 Reasons for Taking a Sub-Orbital Flight ......................................................................................................... 76 Fig. 53 Reasons for Not Taking a Sub-Orbital Flight .................................................................................................. 77 Fig. 54 Ideal Amount to Pay for a Ticket ...................................................................................................................... 77 Fig. 55 Factors Affecting Choice of Operator ............................................................................................................. 78 Fig. 56 Worldwide Launch Activity, 1980 – 2004 ........................................................................................................ 88 Fig. 57 Commercial Intermediate & Heavy Lift Launches, By Country ....................................................................... 89 Fig. 58 National Origin of Components of Commercial Intermediate & Heavy Lift Launch Vehicles.......................... 90 Fig. 59 ASCENT Market Share Projection of Commercial Launches by Country ..................................................... 91 Fig. 60 Review of Orbital’s Family of Rockets ............................................................................................................ 93 Fig. 61 SpaceX Family of Falcon Rockets .................................................................................................................. 94 Fig. 62 How the Demand for Satellite Launch is Calculated ....................................................................................... 96 Fig. 63 Historical and Forecast Commercial Launch Activity for 2005-2014 .............................................................. 97 Fig. 64 Today’s Commercial Satellite Industry Sectors & Associated 2004 Worldwide Revenues ............................ 97 Fig. 65 Payload Usage (Orbital Launches Only) – April to December 2005............................................................... 98 Fig. 66 Payload Mass Class (Orbital Launches Only) – April to December 2005 ...................................................... 99 Fig. 67 Location of Today’s Primary Spaceports ...................................................................................................... 100 Fig. 68 NASA’s Family of Sounding Rockets ............................................................................................................ 103 Fig. 69 Flight Profiles of NASA’s Sounding Rockets ................................................................................................ 104 Fig. 70 List of Global Sounding Rocket Launch Sites ............................................................................................... 105 Warwick Business School – Executive Modular MBA Dissertation – 0262185 6
  7. 7. Fig. 71 Fig. 72 Fig. 73 Fig. 74 Fig. 75 Fig. 76 Fig. 77 List of Original XPRIZE Entrants .................................................................................................................. 106 Artists Impression of Virgin Galactic’s Proposed Spaceport in New Mexico ................................................ 109 SpaceShipOne’s Flight Profile ...................................................................................................................... 110 View from SpaceShipOne During Apogee – October 2004 .......................................................................... 110 Starchaser’s Thunderstar Launch Facility & Rocket ..................................................................................... 111 Flight Profile of Starchaser’s Thunderstar Rocket ........................................................................................ 112 List of Attributes for Space Tourism Related Consumer Experiment ........................................................... 113 List of Appendices Appendix 8 Appendix 8 Appendix 8 Appendix 8 Appendix 8 Appendix 8 Appendix 8 Appendix 8 Appendix 8 Appendix 8 Appendix 8 Appendix 8 Appendix 8 Appendix 8 Appendix 8 Appendix 8 Appendix 8 - A B C D E F G H I J K L M N O P Q Review of Today’s Global Orbital Space Industry ............................................................................. 88 Review of Today’s Satellite Industry ................................................................................................. 96 Review of Global Launch Locations ................................................................................................ 100 Review of NASA’s Family of Sounding Rockets ............................................................................. 103 Flight Profiles of NASA’s Sounding Rockets ................................................................................... 104 Current Sounding Rocket Launch Locations ................................................................................... 105 Original List of XPRIZE Contenders ............................................................................................... 106 Update on Current Space Tourism Launch Vehicle Projects.......................................................... 107 New Entrants to the Sub-Orbital Space Craft Market ...................................................................... 108 Virgin Galactic’s Space Port ............................................................................................................ 109 Virgin Galactic’s Sub-Orbital SpaceShipOne Rocket Plane............................................................ 110 Starchaser’s Sub-Orbital Thunderstar Rocket ................................................................................. 111 Example of Sub-Orbital Space Tourism Attributes ......................................................................... 113 Seven Domains of Attractive Opportunities .................................................................................... 114 Sounding Rocket Survey Contacts ................................................................................................. 116 Sounding Rocket Survey and Associated Results .......................................................................... 118 Space Tourism Survey and Associated Results ............................................................................. 125 Warwick Business School – Executive Modular MBA Dissertation – 0262185 7
  8. 8. 1 Introduction The aim of this chapter is to provide an introduction to the subject area being researched, how the research will be conducted and the methods, tools and supporting materials that will be used to deliver this dissertation. 1.1 Background of the study Space exploration has traditionally been associated with well funded, government backed space agencies. Billion dollar research programmes such as the International Space Station (ISS) serve as a platform for understanding the origins of space and for conducting research into the space technologies of the future. Today’s space industry is dominated by a number of high profile space agencies, namely the U.S National Aeronautics & Space Administration (NASA), European Space Agency (ESA) and the Russian Space Agency (RSA). In the next few years the emerging Chinese Space Agency will also become a major player in the launch market sector. The ISS provides a rich environment for conducting many scientific experiments in zero gravity. However many of the world’s universities will never have a chance of having their experiments conducted on the ISS due to high costs and lack of suitable launch vehicles to reach the ISS. For this reason many universities use a much cheaper and easier to access space launch service known as a sounding rocket. Private enterprise has been able to enter this launch market as sounding rockets are not required to go into orbit (they will normally rise to just above the earth’s atmosphere) and therefore the technical challenges of designing a suitable rocket are much easier and cheaper. In the late 1960s the British government started to fund a sounding rocket service called Skylark and this programme ran successfully for many years until its final launch in 2005. The UK has a worldwide reputation for being an innovative country, laying claim to many world firsts over the years including the design of innovative projects such as the Concorde supersonic aircraft, Hovercraft and the Jet Engine. It was the Concorde project that led the British government to reconsider its position of funding expensive high risk projects. This was due to the fact that Concorde faced significant time and cost over runs during its design phase. Exploration of space may be considered as one of the most risky projects for a government to fund and hence this would explain the British government’s reluctance to assign significant budgets to manned exploration of space. The British government currently provides very little funding to ESA and for this reason British universities are at a significant disadvantage when trying to get their experiments aboard an Warwick Business School – Executive Modular MBA Dissertation – 0262185 8
  9. 9. ESA rocket or launched up to the ISS. Many of the UK’s leading universities, undertaking space related research, such as Leicester and the Open University tend to take part in high profile space programmes which are funded by the Particle Physics & Astronomy Research Council (PPARC). There still remains a significant amount of research that could be undertaken if British universities had access to their own dedicated, low cost sounding rocket service. Therefore one of the main aims of this project will be to look at the current market demand from British universities and whether a new low cost and dedicated sounding rocket service could be established. One company looking to explore the potential of the sounding rocket market is Starchaser Industries, based in Manchester UK, they are one of the world’s leading privately funded space rocket companies. Starchaser would like to exploit the gap in the market left by the Skylark programme and see if a new sounding rocket could be established to target universities wishing to have access to a low cost space launch system for conducting microgravity based experiments. This project will therefore help Starchaser to identify its potential new customers, review current British university research projects that could benefit from such a service and whether or not Starchaser has a long term future in this market without government funding. The other area that will be reviewed in this project is Space Tourism. Over the last fifty years the public’s imagination has been gripped by the possibility of one day being able to take a trip into space. In recent years a few high net worth individuals have been able to buy their way into space by way of the Russian space programme. The Russians see this as a potentially lucrative sideline business which brings millions of dollars into their cash strapped space programme. In order to kick start the space tourism industry a global competition known as the Ansari XPRIZE was launched with the sole aim of encouraging private enterprise to develop a low cost reusable launch vehicle (RLV) which could be used to fly individuals to the edge of space. Extensive research has already been undertaken into the area of space tourism, but the general public’s perception of space tourism is still not widely understood. Competitions such as the XPRIZE help to capture the public’s imagination to the potential of one day being able to take a space flight. This project will therefore conduct a survey to see what the British public’s thoughts are to the potential of space tourism and whether it could offer a company such as Starchaser a lucrative business opportunity in the near future. Many space tourism surveys have been conducted in the past, prior to the winning of the XPRIZE, however this will be one of the first to be conducted on the British public since the XPRIZE was won. Warwick Business School – Executive Modular MBA Dissertation – 0262185 9
  10. 10. The author has worked with Starchaser since 1999, in this time the company has shown true spirit and determination to achieve their dreams of one day establishing a commercial space business. They have been able to run their business on a minimal budget, primarily through sponsorship activities, but at the same time they have been able to achieve many goals including the launch of the largest unmanned rocket from British soil. It is hoped that this dissertation will provide a number of strategic recommendations and additional information for Starchaser to be able to secure future funding to help them grow their business. The author has a close relationship with the management team at Starchaser and hence there is a personal interest to make this business a success. This project, albeit a small contribution, to the overall success of the venture will allow Starchaser to understand their target markets and any potential barriers that may exist to them achieving their future business objectives. 1.2 Project objectives There are two fundamental objectives for this project. Firstly a review of the current sounding rocket market will be conducted to see whether there is enough market demand from British universities to establish a dedicated sounding rocket service for them. The second objective of this project is to understand the general public’s thoughts on space tourism and whether they would be interested in using such a service if it were made available in the near future. The aim will be to try and understand their requirements and concerns about taking a flight aboard a reusable space launch vehicle. Starchaser would then be able to tailor their future space tourism business to meet these requirements. This research will then allow the author to make a proposal as to how Starchaser should enter their target markets, what barriers may exist to them achieving their business objectives and what the potential of the target markets are likely to be. 1.3 Methodology The area of space flight and space tourism has provided the author with many references on the current market trends, competitors, issues and future trends for the development of the space industry. Most of the references were obtained from the government space agencies, British universities, conference proceedings and websites. Various academic related reference materials have been obtained directly from the world’s leading authorities in the subject areas being discussed in this project. Warwick Business School – Executive Modular MBA Dissertation – 0262185 10
  11. 11. A number of relevant surveys have been conducted in the past and these provided the inspiration for the two surveys conducted as part of this project. To meet the needs of the two objectives of this project, two different surveys will be undertaken. One qualitative and the other will be quantitative in nature. The first survey, qualitative in nature, will target British universities who are currently undertaking space related research and who could benefit from having access to a micro gravity, sub orbital sounding rocket launch service. The main aim will be to try and understand current launch requirements, payloads carried and whether they would use a new low cost launch service if one were made available. The second survey, quantitative in nature, was targeted at a much wider audience. This audience would comprise of members of the general public who would be asked questions on their thoughts on space tourism and whether or not they would be interested in using such a service in the future. Both of these surveys will be distributed by way of a suitable web based survey tool. 1.4 Organisation of the report This dissertation will be split into the following chapter headings : Chapter 1 : Provides an introduction to the dissertation, how it will be written, the objectives to be met and the research to be undertaken  Chapter 2 : Provides an overview to both the sounding rocket and emerging space tourism markets, competitive analysis of both of these market sectors, an introduction to Starchaser and how they hope to grow their business over the next few years  Chapter 3 : The literature review will examine the current academic research that can support this dissertation along with identifying relevant MBA frameworks and management tools that can support the areas being researched for Starchaser  Chapter 4 : Discusses the results from the surveys conducted for this project and synthesises the findings from Chapters 2 & 3 to allow a strategy to be defined for Starchaser  Chapter 5 : Proposes a strategy for Starchaser and a rationale will be developed as to why Starchaser should follow this strategy and the expected benefits to be obtained from following this strategy  Chapter 6 : Provides a conclusion to the dissertation and the overall findings and proposed strategy will once again be highlighted in a simplified manner. Limitations of the research will be discussed along with proposed future areas for research Warwick Business School – Executive Modular MBA Dissertation – 0262185 11
  12. 12. 2 2.1 Industry & Company Review Introduction The following chapter provides a brief overview of the sounding rocket and emerging space tourism industries, with a particular emphasis on emerging technologies, companies and trends which may impact the future growth of Starchaser. Starchaser currently have a five stage growth plan and in order to derive a strategy, as part of this dissertation, to execute this plan it was important to review the current orbital launch market and the industry that they primary serve, namely launching satellites. This chapter will also include an analysis of the key competitors and challenges that Starchaser will have to overcome in order to grow their business. It was also necessary to review the UK’s current space policy in order to understand any barriers that may exist which could affect the growth of Starchaser. A review of Starchaser will also be carried out, providing further information about their current business model, technology and company direction. 2.2 Review of Today’s Global Space Industry The commercial space sector has seen significant changes in recent years, with the dotcom period during the late 1990s causing a sharp rise and fall in the number of commercial launches worldwide. As communications technology has improved, satellites have become much smaller and there is now a requirement to evaluate designs for new lower cost launch vehicles. These will be able to launch smaller satellites more economically than the larger launch vehicles traditionally offered by the government backed space agencies. At the same time, other low cost launch services are being developed to service other sectors such as the emerging space tourism industry. Today’s space industry is dominated by the government backed space agencies such as NASA and ESA. Over the years NASA has tended to focus on developing their Space Shuttle programmes to support the International Space Station (ISS) and this has meant that a number of commercial organisations have emerged to service the ever expanding orbital launch market. Today’s primary orbital launch providers are discussed in more detail in Appendix 8-A. Most of the commercial launch providers are serving the lucrative satellite launch industry and deploying payloads into earth orbit represents the largest commercial opportunity in today’s space industry. Today’s satellite industry is discussed in more detail in Appendix 8-B. Warwick Business School – Executive Modular MBA Dissertation – 0262185 12
  13. 13. 2.3 Overview to the Sub-Orbital Sounding Rocket Industry Sounding rockets take their name from the nautical term ‘to sound’, which means to take measurements. Sounding rockets have been in use since the 1950s and the technology used in their design is relatively simple and based primarily on military missile technology. They are used as an experimental platform to test instruments on satellites / spacecraft and to provide scientific information about the sun, stars, galaxies and the earth’s atmosphere. This type of testing is unique because it is simple, cost-effective and time efficient, also the payloads used for experimentation can be developed in a short period of time, eg six months. Sounding rockets are ideal for deploying Micro Gravity based experiments, ie those scientific experiments that need to be conducted in a near zero effect gravitational environment. It is possible to conduct micro gravity based experiments in high drop towers or by using a plane following a parabolic flight curve, (as used for astronaut training). However sounding rockets provide the ideal means of deploying these payloads as they are able to reach a far greater height and more importantly the experiments can be conducted for longer periods of time. The various micro gravity launch methods are compared below in Fig. 1 [1]. It is possible to also conduct these experiments on either the Space Shuttle or ISS however the country wishing to launch the payload would have to be a member of either the NASA or ESA space programmes in order to gain access to these facilities. Fig. 1 Comparison of Micro Gravity Launch Methods Warwick Business School – Executive Modular MBA Dissertation – 0262185 13
  14. 14. Fig.2 [2] below shows a typical layout for a sounding rocket, the rocket is normally split into two parts, the payload and the rocket motor. This is called a single stage rocket. For greater height and hence longer experimentation times, multi stage rockets are used. The rockets are modular in nature meaning that the rockets can be easily configured according to the weight of payload being carried. In addition to the motor and payload, the rocket will contain a simple guidance system, telemetry antenna (for transmitting results back to the ground) and a radar tracking beacon so that the rocket can be tracked during flight. Fig. 2 Typical Configuration for a Sounding Rocket After the rocket is launched it follows a parabolic trajectory into space and as the rocket motor uses its fuel, it separates from the payload and falls back to earth. Meanwhile, the payload continues into space and when the payload reaches the top of the parabolic flight, ie at it’s apogee, the experiments are conducted. In most cases, after the payload has re-entered the atmosphere, it is brought gently down to earth by way of a parachute and is then retrieved. A typical flight trajectory profile is shown below in Fig.3 [2]. Fig. 3 Typical Parabolic Flight Path for a Sounding Rocket Warwick Business School – Executive Modular MBA Dissertation – 0262185 14
  15. 15. Scientific payloads are carried to altitudes of between 30 and 800 miles and although the overall time spent in space is relatively short, (typically 5 to 20 minutes) the experiment is perfectly positioned to conduct its mission successfully. As the scientific payload does not go into orbit, sounding rocket missions do not need expensive booster rockets or extended telemetry and tracking technology. Significant cost savings are realised as parts and rocket motors are acquired in large quantities and they utilise tried and tested design configurations for each launch. In some cases, namely those missions conducting astronomy, planetary or micro gravity experiments, the payloads are recoverable which means the costs of experiments and subsystems are spread over many missions. Scientists are able to accomplish their research at a specific time and place because the sounding rockets can potentially be launched from temporary sites all over the world. Due to the low cost and short lead time, sounding rocket payload testing is invaluable for University students conducting graduate work in scientific fields. Sounding rockets offer one of the most robust, versatile and cost-effective launch systems and in the case of NASA has provided nearly 40 years of critical scientific, technical and educational contributions to the nation’s space programme. The reasons for their success are as follows [3] : Quick, low cost and fast access to high altitudes where optical observations of astronomical, solar and planetary sources can be made of radiation at wavelengths absorbed by the earth’s lower atmosphere  Direct access to the earth’s mesosphere and lower thermosphere (40-120km)  Ability to fly relatively large payloads (>500kg) masses on inexpensive vehicles  Provision of several minutes of ideal, “vibration free” microgravity  Ability to gather in-situ data in specific geophysical targets such as the aurora, the equatorial electro jet and thunderstorms  Access to remote geophysical sites and southern hemisphere astronomical objects  Long dwell times at apogee  Ability to fly simultaneous rockets along different trajectories, eg with different apogees, flight profiles etc  Ability to fly numerous free-flying sub-payloads from a single launch vehicle  Ability to recover and re-launch instruments Warwick Business School – Executive Modular MBA Dissertation – 0262185 15
  16. 16. 2.3.1 Review of the Primary Sounding Rocket Launch Providers Today’s sounding rocket launch activities are mainly conducted in the US or Northern Europe. Both NASA and ESA have active sounding rocket programmes and there are a number of companies that build sounding rockets on behalf of these space agencies and for independent research organisations. These particular regions have been able to develop and sustain a reliable launch record and for this reason other countries around the world tend to use these services rather than go to the time and effort of developing their own sounding rocket launch capabilities. Given that the sounding rocket experiments are relatively expensive and sometimes irreplaceable, many universities and research establishments prefer to launch their payloads with leading space agencies such as NASA and ESA. The primary reason is to ensure that their payloads are launched safely with good quality measurements being taken when the payload reaches apogee. Commercial companies such as Orbital Sciences Inc. have been successful at entering this market sector, primarily launching U.S Air Force related sounding rockets, however their business model is changing to support small satellite related launches. The following section identifies the key sounding rocket programmes. 2.3.1.1 European Based Sounding Rocket Programmes Up until 2005, Europe had one of the oldest sounding rocket programmes, the British Skylark sounding rocket service which was first launched in the 1950s. Skylark was initially flown from the Woomera launch facility in Australia and was first operated on a commercial basis by British Aerospace. This programme was then taken over by Matra Marconi Space and finally Sounding Rocket Services (SRS) Ltd in 1999. Skylark [4] was flown for the last time in April 2005 from the Esrange range in Northern Sweden. Following the demise of the Skylark programme, SRS now plan to become the European agent for the American built Oriole range of rockets and a supplier of hardware to the German / Brazilian VSB-30 vehicle. ESA are currently participating in four different sounding rocket programmes, namely the German Texus and Mini-Texus programmes, the Swedish Maser programme and the joint German and Swedish Maxus programmes [5] The Texus and Mini Texus programmes were initiated in 1976 by the German Ministry for Research as a preparatory programme to the 1983 Spacelab programme. The Texus programme was commercialised and is today managed by EADS-ST, Bremen. The Texus programme employed Skylark VII rocket motors as the basis of its programme. The most recent Texus rocket, Texus-EML1, was flown on 1st December 2005 and provided 7 minutes of micro-gravity experimentation time. This particular flight used the Brazilian VSB-30 rocket engine, the successor to the Skylark rocket motor. The Mini Texus programme was established to fill the gap in the market for projects requiring microgravity for the range of 3-4 Warwick Business School – Executive Modular MBA Dissertation – 0262185 16
  17. 17. minutes and employed two stage rockets from surplus military equipment. They are able to launch 100kg scientific payloads to an altitude of 140km. The Swedish Maser programme was started in 1986 and is managed by the Swedish Space Corporation, (SSC), Solna. The Maser programme also used Skylark VII rocket motors. The first Maser payload was launched in March 1987 with their latest Maser 10 rocket programme being successfully flown in March 2005. These rockets are relatively large and are able to carry multiple payloads if required. The Maxus Programme is a long duration sounding rocket service developed as a joint development between EADS-ST and the SSC. This programme is capable of launching a 780kg payload to an apogee of 715km which corresponds to about 13 minutes of microgravity time. As the rocket flies above the Esrange’s limit of 300km, the range’s safety regulations require the Maxus to have a guidance control system and a self destruct system. The Maxus rocket is ESA’s most powerful sounding rocket. The last Maxus sounding rocket, number 6, was launched in November 2004, this particular rocket cost $12million to launch and successfully deployed eight micro gravity experiments. The next European sounding rockets to be launched will be the Maxus 7 and Texus 43, in May 2006 as part of ESA’s ELIPS micro gravity programme. The current ESA funded sounding rocket programmes are summarised in Fig.4 below:- Fig. 4 Current ESA Supported Sounding Rocket Programmes 2.3.1.2 U.S Based Sounding Rocket Programmes The U.S sounding rocket industry is centred around the NASA Sounding Rocket Programme (NSRP). The NSRP is a suborbital space flight programme that primarily supports NASA sponsored space and earth science research activities, other government agencies and international sounding rocket groups and scientists. Since NSRP was established in 1959, nearly 2800 missions have flown with an overall science mission success rate of 86% and launch vehicle reliability of 96%. The programme is a low cost, quick response effort that currently provides between 20 and 30 flight opportunities per year. These rockets are launched from a variety of fixed and mobile launch sites around the world. Warwick Business School – Executive Modular MBA Dissertation – 0262185 17
  18. 18. NSRP customers are primarily from the university and government research groups however some research activities involve the commercial sector. The programme has contributed major scientific findings and research to the world of suborbital space science and has also provided a valuable proving ground for space ship / station sub-components. There are currently eleven operational support launch vehicles in the NSRP and all of these launch vehicles utilise a solid propellant propulsion system. These rockets typically use surplus 2030 year old military rocket motors and all the rockets are unguided. The NSRP uses three main groups of rockets [6] and these are described overleaf and referenced in more detail in Appendices 8-D & E [58] Black Brant, produced by Bristol Aerospace Limited has been in service since 1962 and provides the main ‘workhorse’ of the NASA sounding rocket fleet. Different versions of the Black Brant can carry payloads ranging between 70 & 850 kilograms to altitudes from 150 to 1500 kilometres and can provide up to 20 minutes of microgravity time during flight. The smallest Black Brant rocket is the Black Brant 5 single stage rocket and is used as the basis of larger multi stage rockets from the Black Brant family. The most powerful rocket the Black Brant 12 is a four stage vehicle that can launch a 113 kg payload to 1400 kilometres or a 454 kilogram payload to an altitude of at least 400 kilometers. Oriole, produced by DTI Associates, was developed in the late 1990s to provide launch services for commercial and scientific payloads. Oriole is significant as it was the first privately funded sounding rocket in the U.S and the first new sounding rocket for 25 years. The Oriole, when combined with a Terrier rocket motor can reach an altitude of 385 kilometres providing between 6 to 9 minutes of microgravity time. Terrier – Orion, produced by DTI Associates, is a two stage spin stabilized sounding rocket. The Terrier-Orion can launch a payload weighing up to 290kg to an altitude of 190 kilometers. 2.3.2 Review of Sounding Rocket Launch Sites Most of today’s global sounding rocket launch sites, have been developed from existing missile test ranges and others have been established due to the restrictions with getting access to some government owned launch sites. One of the first sounding rocket test facilities was established in Woomera, Australia and since then numerous sub-orbital launch facilities have been established to cater for the sounding rocket market sector. The main sounding rocket launch sites around the world are listed in Appendix 8-F. From a U.S perspective there are two main launch sites, White Sands Missile Range, New Mexico & Wallops Island, Virginia. All launches at these facilities are overseen by NASA and hence it can be difficult to obtain a launch slot outside of the allotted launch programme. The Warwick Business School – Executive Modular MBA Dissertation – 0262185 18
  19. 19. locations of these sites and other proposed non-federal launch sites are shown below in Fig.5. [6] White Sands Missile Range is the Department of Defense’s largest overland national range and is located in southern New Mexico approximately 35 miles northeast of Las Cruces. The climate is semi arid with usually unlimited visibility, warm to hot temperatures and a low humidity. The range covers an area of 8100 square miles making it ideal for the launch and recovery of high altitude sounding rockets. The facility is operated by the U.S Army and is also used for missile flight testing, rocket engine development and for conducting experimental space craft flights. Fig. 5 U.S Federal, Non-Federal and Proposed New Spaceports Wallops Island is the location from which the majority of U.S sounding rockets are launched. The facility was established in 1945 and since then there have been over 14,000 small rocket launches from this facility. The facility is maintained by NASA and caters for both orbital and sub-orbital launches. On average there are about 20 sub-orbital sounding rocket launches per year. Moving forwards, the facility intends to become a centre of excellence for suborbital launches and the facility has been upgraded to include launch facilities for commercial organisations. From a European perspective there are two key sounding rocket launch facilities. They are located in Northern Europe, the Esrange facility in Sweden and the Andoya range in Norway. The Esrange facility is the operational centre for the Swedish Space Corporation (SSC) and its location 200km north of the Arctic circle offers several unique advantages, namely Warwick Business School – Executive Modular MBA Dissertation – 0262185 19
  20. 20. payloads from sounding rockets have a landing zone of 120 x 75 km in size. This makes it ideal for easy payload recovery operations (this is the only place in Europe where payloads can be recovered on land). The location is outstanding for the observation of the boreal phenomena such as the northern lights and a good launch infrastructure is in place to support space agencies from across the World. Nearly all of ESA’s sounding rockets are launched from this facility due to its proximity to the Arctic Circle. The Andoya range in Norway is unique as it stretches North West from Norway over the Arctic and provides the most northern location in the World for a permanent rocket launch facility. The facility was built in 1962 and is owned and operated by the Norwegian Space Centre. Andoya range has conducted more than 650 rocket launches and has hosted nearly 70 universities and research institutes from around the World. Its location provides favourable conditions for studying various atmosphere and ionosphere phenomena and as the launches are conducted over the arctic the airspace is relatively clear and there are hardly any major shipping lanes to worry about. The facility has a large impact area, permitting a variety of launch directions and rocket configurations without the need for guidance systems. 2.4 Overview to the Emerging Sub-Orbital Space Tourism Industry The world’s first commercial orbital space tourism flight took place on April 28th 2001 when a wealthy Californian investor Dennis Tito boarded a Russian Soyuz rocket to the International Space Station at a price of $20million [7]. This made him the first individual to personally pay for a ticket into space. This had two knock on effects for the Russian space industry. Firstly they could see that there would be huge financial reward to their own space industry if they supported these space tourism flights. Secondly the Russian space craft was considered to be a fairly reliable space craft, despite its age, and it helped to improve its public image, something the Americans were struggling to achieve with its ill-fated Shuttle programme. Since Tito’s flight in 2001 two other space tourists have taken off on Russian space craft, in April 2002 Mark Shuttleworth [8] became the second commercial space tourist as a member of another mission to the ISS. More recently in September 2005 Greg Olsen [9], a U.S scientist & entrepreneur, became the third space tourist. Both Mark and Greg were thought to have also paid the Russian Space Agency $20million for the privilege of travelling to the ISS. The Soyuz space craft is currently the only vehicle which can provide supplies to the ISS and with there being three seats onboard and only two cosmonauts required to fly the Soyuz craft, for the moment at least, this spare seat provides the only means for private individuals to achieve orbital flight. Clearly the $20million cost per ticket of flying into space will have to be brought down considerably if the orbital space tourism industry is to attract many more private Warwick Business School – Executive Modular MBA Dissertation – 0262185 20
  21. 21. space travellers. These three privately funded space flights have demonstrated to the public that space tourism is not only possible but will become more popular in the not too distant future. According to the Futron Corporation, who conducted a Space Tourism Market Study in 2002 [10], there is a potential sub-orbital market for 15,000 passengers and $700 million in revenues per year by 2021. The orbital space tourism industry is estimated to have 60 passengers who will help to bring in $300 million per year by 2021. This makes the industry potentially worth $1 billion by 2021. In terms of potential market growth, sub-orbital flight, simply due to its cost benefits, would appear to be the main sector that will drive the space tourism industry. The main problem with kick starting the sub-orbital space tourism industry is the availability of suitable space craft. Up until now, nearly all space craft and launch services have been provided by the government backed agencies such as NASA and ESA. These facilities were developed for manned exploration, launching payloads into space and constructing the ISS. In order for this industry to establish itself, a new breed of cheaper, more affordable, space craft and launch facilities need to be developed. As with any new industry, companies will not invest time and money in developing these space craft without a suitable incentive. For this reason and to help kick start the space tourism industry a global competition was established, and a significant financial prize offered, to the first non-government organisation / company who could develop a reusable sub-orbital space craft. This competition was known as the Ansari XPRIZE. 2.4.1 The Ansari XPRIZE Competition The Ansari XPRIZE [11] is widely regarded as the catalyst for the emerging sub-orbital space tourism industry and is based on a competition run in the 1920s, won by Charles Lindberg in his Spirit of St.Louis aircraft, for the first aircraft to successfully cross the Atlantic. Once it was shown that it was possible to cross the Atlantic by plane, other companies emerged and started to develop aircraft which would one day help the birth of Atlantic passenger travel. The Spirit of St.Louis proved that the principal barrier to commercial air travel was not a technological barrier but more of a psychological one. It was this competition that gave Peter Diamandis the idea of establishing the XPRIZE Foundation. The aim of the XPRIZE Foundation was to create a future in which the general public would personally participate in space travel and its benefits. The Ansari XPRIZE was the first competition initiated by the XPRIZE Foundation and it offered a $10million prize to establish the space tourism industry through competition amongst the most talented entrepreneurs and rocket experts in the world. Warwick Business School – Executive Modular MBA Dissertation – 0262185 21
  22. 22. The prize would be awarded to the first team that could : Privately finance, build and launch a spaceship, able to carry three people to 100 kilometers , (the official start of space)  Return safely to Earth  Repeat the launch with the same spaceship within 2 weeks The aim of repeating the launch was to prove that the spaceship could be reused rather than having to rebuild a new spaceship from scratch each time. Since its inception in May 1996, (up until the XPRIZE was won in October 2004), 27 teams from seven countries competed in the prize. The aim of the prize was to :  Create a new generation of aviation heroes in the mould of Lindberg  Provide inspiration and education opportunities for students  Focus public attention and investment capital on this new business opportunity  To challenge explorers and rocket scientists from around the world From its inception in 1996, many different designs of space craft were entered into the competition. These ranged from conventional plane style craft which took off on a runway, traditional multi-stage rockets complete with a three person space capsule, through to vehicles that were towed or carried aloft to a high altitude before being released to travel to their final apogee. Further information about the original XPRIZE contenders can be found in Appendix 8-G. The XPRIZE was won in October 2004 by Scaled Composites and their SpaceShipOne vehicle [12]. This was carried aloft by a high altitude plane called White Knight. Once the White Knight had reached a specific altitude the SpaceShipOne rocket powered plane would be released, its engines would be ignited and it would then continue up to an altitude of 112 kilometers. It would remain on the edge of space for 5 minutes before starting its descent. SpaceShipOne then glided back to its original takeoff location. SpaceShipOne is shown below in Fig.6 underneath its launch carrier, White Knight. Fig. 6 SpaceShipOne Space Craft & White Knight Launcher Warwick Business School – Executive Modular MBA Dissertation – 0262185 22
  23. 23. SpaceShipOne technology is currently owned by the co-founder of Microsoft, Paul Allen and his company called Mojave Aerospace Ventures (MAV). He bankrolled the $20Million project and even though the prize was only $10 million, the prestige of winning the XPRIZE combined with the downstream commercial opportunities that would come along, made the investment worth while. 2.4.2 Current Developments in Low Cost Space Craft Design The original Ansari XPRIZE had 27 entrants competing for the $10 million prize. Today, only 7 of the original contenders remain in business and a number of new companies have entered the low cost space launch industry. Many of the original entrants to the competition were designing craft which could be used after the XPRIZE, however a few companies including Starchaser were designing their craft with one goal in mind, to win the XPRIZE. Starchaser felt that using a single stage rocket would be the simplest and most cost effective way of winning the XPRIZE. Starchaser were the second favourite entrant to win the XPRIZE as they were the only other entrant to have actually launched an XPRIZE development rocket prior to SpaceShipOne winning the prize. The following table lists the original XPRIZE contenders who are still developing space craft for the space tourism sector. Further information about these companies can be found in Appendix 8-H [13]. Fig. 7 Post XPRIZE Contenders Currently in Business, (See Appendix 8-H) The XPRIZE contenders, in most parts, were funded privately from numerous sponsoring companies and organisations. They were able to develop significant space technology on a minimal budget and in the case of Starchaser were able to develop a fully working rocket. Their rocket ‘Nova’ was successfully launched in November 2001 and was subsequently used to promote the XPRIZE initiative until the prize was claimed by Paul Allen’s company. Compared to the government space agencies, the XPRIZE contenders were developing their craft on relatively small budgets. Private enterprise will make or break the future space tourism industry and during the latter stages of the XPRIZE competition a number of the World’s most high profile billionaires decided that they wanted to get involved with the privately funded commercial space industry. Fig.8 overleaf shows the new entrants to the sub-orbital spacecraft market sector. Warwick Business School – Executive Modular MBA Dissertation – 0262185 23
  24. 24. Fig. 8 New Entrants to the Privately Funded Space Industry Further information about these companies can be found in Appendix 8-I. Virgin Galactic are currently leading the way in terms of introducing economically viable technology but it won’t be too long before other companies such as Starchaser develop their own technology to compete in this market sector. 2.4.3 Emergence of Commercial Spaceports As of today there are five non federal spaceports licensed in the U.S however due to the expected growth in the private space sector, eight other locations in the U.S have applied for a license to operate a space port. For private space companies such as Starchaser this is important as it will provide them with a gateway into space without fear of imposing on any government backed space programmes. One of the first new spaceports has been established in New Mexico with the help of the local government. They realised that the private space industry could bring significant financial and employment benefits to its region and with an abundance of wide open space it decided to apply to the Federal Aviation Authority (FAA) for an official license to operate a non-federal spaceport. The Southwest Regional Spaceport is located at Las Cruces, New Mexico and as part of its marketing campaign recently hosted the global XPRIZE Cup, a competition for privately funded space companies to demonstrate their capabilities. The primary reasons that Las Cruces was granted an FAA operational license were [14]: Its relatively high altitude, where the air is thinner, allowing rockets to be launched much more easily  Approximately 350 days of sunshine annually, providing near perfect launch and recovery operations  The availability of large, open, unpopulated land for establishing launch facilities with unrestricted airspace  The availability of significant infrastructure along with access to a large population of engineers and scientists that have previously been involved with a distinguished history in space related research Warwick Business School – Executive Modular MBA Dissertation – 0262185 24
  25. 25. The New Mexico Government commissioned Futron Corporation to estimate the potential space tourism market size [14]. Using a number of quantitative and qualitative survey methods they were able to estimate the potential total market size (in terms of number of flights) shown in the first row of Fig.9. The New Mexico market share is shown in the second row. Fig. 9 Global Space Tourism Market Opportunity It is expected that other spaceports will be developed overtime which explains the drop from 75% to 50% market share, however with New Mexico developing the first Spaceport they will have a significant first mover advantage. Starchaser were the first space tourism company to establish a base at the spaceport and now with Virgin Galactic wishing to establish a significant presence in the region, New Mexico has the opportunity to position itself as the primary destination for those interested in space tourism. Taking into account the space tourism providers, visitors and spectators to the proposed rocket racing league developed by XCOR, Futron expect the economic benefits to the region to be very significant, these are highlighted below in Fig.10. Fig. 10 Economic Value to New Mexico State Over time, the Spaceport will expand considerably and will become home to a number of space tourism operators, service companies and manufacturing operations. These activities are summarised overleaf in Fig.11 [14]. The combination of Virgin Galactic, Starchaser and New Mexico State has for the first time shown that space tourism for the masses is not only a reality but will be possible within 2 years. The technology has been demonstrated and proven, Virgin and Starchaser have the vision that space tourism is economically achievable and the New Mexico State authorities have the belief that they can lay the foundations for an entirely new industry which will bring significant economic benefits to it’s region. Warwick Business School – Executive Modular MBA Dissertation – 0262185 25
  26. 26. Fig. 11 New Mexico Spaceport Business Opportunities 2.5 Review of the UK’s Space Strategy Today’s UK space strategy, prepared by the British National Space Committee (BNSC) focuses on three core areas and is currently supported by the British Government with nearly £200Million of funding. This is relatively small when compared to France which contributes nearly £2Billion to its space efforts, making the UK a relatively small partner in the European space industry. The UK’s space strategy maps out clear scientific and commercial objectives rather than to develop space technology as an end to itself. For this reason, the UK’s Vision is [15]:- “To be the most developed user of space-based systems in Europe for science, enterprise and the environment. UK citizens will provide and exploit the advanced space-based systems and services which will stimulate innovation in the knowledge driven society”. To achieve this vision the government has therefore decided to focus on the following : To expand knowledge in astronomy, planetary and environmental sciences  To create opportunities for commercial exploitation of satellite systems  To advance key public services Warwick Business School – Executive Modular MBA Dissertation – 0262185 26
  27. 27. 2.5.1 Enhancing UK’s standing in astronomy, planetary & environmental science One of the largest beneficiaries of the Government’s £200Million investment per year is the Particle Physics and Astronomy Research Council (PPARC). The council provides grants to University based research programmes which are working towards a greater understanding of the earth and the universe. 2.5.2 Increased productivity through promoting the UK’s use of space Today’s space industry is helping to stimulate new opportunities in the economy, in commerce, public policy, science and for consumers. This is achieved through direct provision of satellite services. The Government’s main goal is to maximise the exploitation of these opportunities throughout society. To achieve this it needs to influence the development of new space systems within the international market and it needs to establish the downstream services which could exploit them. The number of different projects identified by the government to support the three key users of satellite technology are shown in Fig.12 Fig. 12 Key Users of Satellite Technology / Services 2.5.3 Developing innovative space technologies that improve quality of life In order to remain an effective user of space systems across the economy, the UK must retain a capability to understand end to end systems and produce crucial elements of the technology. This strengthens the voice of the UK during International negotiations and underpins the delivery of the other two objectives in the UK space strategy. Warwick Business School – Executive Modular MBA Dissertation – 0262185 27
  28. 28. 2.5.4 Size and Health of the UK Space Industry The commercial sector of the British space industry primarily supports the satellite industry. This particular industry is split into two sectors, those companies providing space technology for the satellites, the ‘upstream’ industry and those companies that actually exploit the satellite services, namely the ‘downstream’ industry. In 2004 the BNSC conducted a survey of all UK companies involved with space related business, 222 organisations were represented in the findings [16]. The space related turnover of these companies varies over a wide range with only five companies having a space turnover of £100Million and some 68% of the companies having a space related turnover of less than £1Million. The total space related turnover of the UK space industry is estimated to be £4Billion. Compared to the upstream sector the downstream turnover represents 87%of the total industry turnover. The breakdown of the upstream and downstream sectors are shown below in Fig.13. Fig. 13 The Upstream and Downstream Sectors of the UK Space Industry The application of these activities is dominated by the telecommunications and broadcasting industry, this application alone represents nearly 80% of all UK space industry turnover. This investment has paid off as the UK is one of the World leaders in the adoption of digital television services. Fig.14 below shows the turnover by space application. It is significant that the space transportation sector represents only 1% of the total turnover. Fig. 14 2003 Turnover by Application, Excluding the Consumer Market Warwick Business School – Executive Modular MBA Dissertation – 0262185 28
  29. 29. 2.5.5 UK Involvement with the ESA Programme The UK is one of the founding members of the ESA programme which is divided into two categories, optional and mandatory programmes. The UK chooses to take part in most of the optional programmes, and membership of the mandatory programmes is subscription based and rates are worked out as a percentage of each European country’s GNP. Fig.15 below shows the various ESA programmes in 2001 and how the UK subscribes to programmes which it feels best supports the UK space strategy, namely Navigation, Earth Observation and Science [1]. Today, the UK contributions to ESA are roughly the same, this is despite the UK being the second richest country, (behind Germany), in Europe. Fig. 15 UK Financial Contributions to ESA Programmes 2.5.6 UK Micro-Gravity Activities The main issue faced by the UK is that it does not have access to a dedicated micro gravity environment. The UK decided not to be a member of the ISS when it was being discussed in the 1980s. Similarly the UK has refused to become involved with micro gravity programmes run by ESA. The UK has decided to not participate in the European Life and Physical Sciences (ELIPS) research programme and as such will not be able to get access to the research and data derived from this programme. In 2002 , 102 UK researchers from 33 universities, 5 research institutions and 13 industrial companies were identified as potential users of the ELIPS programme [1]. These researchers also formed part of the survey population for this dissertation and the results will be discussed in Chapter 4. Some UK universities have used sounding rockets for conducting micro gravity experiments but with the demise of the Skylark programme the UK currently does not have a dedicated launch facility for these experiments. As mentioned earlier, Sounding Rocket Services Ltd are looking to re-introduce a new sounding rocket service in the near future. Warwick Business School – Executive Modular MBA Dissertation – 0262185 29
  30. 30. 2.6 An Overview of Starchaser Industries Starchaser Industries is a privately held, high technology company that specialises in the development, operation and commercialisation of space related products and services. Starchaser enables new space related business opportunities by providing safe, reliable affordable and reusable access to space for both space tourism and micro-satellite launch markets. Founded in 1992 by current CEO Steve Bennett, the company is staffed by a highly skilled, innovative and motivated workforce based at its research & development, assembly and integration facility in Hyde, Cheshire, UK. Steve Bennett also serves as the Director of Space Technology at the University of Salford. Starchaser began life as an experimental rocket test programme set up by Steve in 1992. The objective had been to develop an inexpensive means of delivering small scientific payloads to high altitudes. This research was funded through a variety of sponsorship deals and by the mid-nineties the project had grown into a team effort. In 1996 the team successfully launched a 21ft rocket, Starchaser 2, which at that time qualified as the largest private civilian rocket ever to be built and flown in Europe. Starchaser has an enviable record of successful launches and they have now become internationally recognised as leader’s in their field and are rapidly becoming a household name. Starchaser officially entered the Ansari XPRIZE in 1997, one of the original entrants to the competition and was incorporated as a private limited company in December 1998. On 22nd November 2001 Starchaser successfully launched Nova, the world’s first privately built reusable rocket capable of carrying passengers into space. In 2001 Starchaser started the development of their Churchill range of rocket engines, culminating with the development in November 2003 of the Churchill Mk3, a large 15 tonne bi-liquid engine. The intention was to use a pair of these engines to power Starchaser’s official entry to the XPRIZE competition, the Thunderstar rocket. Starchaser initiated a very successful educational outreach programme in 2003, an ideal platform to educate the school children of today into the technology and space tourism possibilities of tomorrow. This activity along with open days at their facility provided a steady source of income for the company. Starchaser then transferred its presentation and exhibit materials to the Spaceport Visitor Centre in Liverpool in July 2005, this was to become the UK’s leading space related visitor attraction. In 2005 Starchaser opened an office in New Mexico, the world’s first dedicated commercial spaceport. Starchaser intend to use this facility as their launch facility for future sub-orbital and orbital space programmes. Warwick Business School – Executive Modular MBA Dissertation – 0262185 30
  31. 31. Starchaser spent nearly six years working towards their goal of winning the XPRIZE competition however they were beaten by Paul Allen’s SpaceShipOne programme. They had acquired valuable knowledge and experience in developing low cost rocket systems and rather than disappear, as most other XPRIZE contenders did after the competition, they decided they wanted to develop Starchaser into a proper commercial space business. As part of this process, Starchaser began work in 2004 to convert their business into a public limited company and raise the necessary funding to develop new facilities, rocket programmes and allow a facility to be opened in the States, potentially Starchaser’s single largest market. Overtime, Starchaser began to devise a business plan, one which would allow the business to grow organically and allow the company to one day be able to compete in the orbital space tourism market. Starchaser’s primary objectives are :  to provide safe, reliable and affordable access to space for all  to become market leader in non government space access  to be recognised as ‘the’ British space programme Starchaser realised early on that the investment community was nervous about funding purely space tourism focused companies and therefore devised a stepping stone business plan that would allow them to gradually achieve their space tourism dreams. Starchaser will initially develop a new programme for sub-orbital sounding rockets, Project Skybolt, shown in Fig.16 below, was conceived to address this market sector. Skybolt is effectively a reusable sounding rocket providing the capability to launch scientific payloads into space at a very affordable rate. The reusable nature of Skybolt makes it unique in the industry and will help drive down launch costs. Skybolt will be 12m tall and will deliver a 100kg payload to a target altitude of 100 miles. Skybolt could be seen as the natural successor to the British Skylark programme referenced earlier in this chapter. Fig. 16 Reusable Skybolt Sounding Rocket Warwick Business School – Executive Modular MBA Dissertation – 0262185 31
  32. 32. One of the key strengths of Starchaser is its internal design capabilities. Through a sponsorship agreement with a product development software company they use state of the art computer aided design systems to design all components of their rockets. As well as the launch vehicle, Starchaser also design their own engines. Their latest engine, Storm, is a modified and slightly smaller version of their Churchill 3 engine and this will be used to power the Skybolt sounding rocket. This engine is shown below in Fig.17. Fig. 17 ‘Storm’, 7 tonne Bi-Liquid Rocket Engine The Skybolt programme will allow revenues to be generated which will then contribute towards their next programme, Project Thunderstar, to enter the new and lucrative sub-orbital space tourism sector. Thunderstar is a single stage rocket powered by a pair of Churchill 3 engines. The capsule would be capable of carrying three people and after reaching apogee would return to earth via a GPS guided parachute. The flight profile of Thunderstar is shown in Appendix 8-L and Starchaser’s range of rockets are shown below in Fig.18. Fig. 18 Starchaser Range of Rockets Warwick Business School – Executive Modular MBA Dissertation – 0262185 32
  33. 33. Despite limited funding, Starchaser have reached many milestones over the last twelve years and they have remained in business with the aid of creative ways of raising revenue streams. If they had proper financial and business plans then their dream of being the UK’s space business will become a reality. The remainder of this dissertation will identify how this can be achieved. 2.7 Summary The aim of this chapter has been to understand the shape and make up of the current sounding rocket and emerging space tourism industries, who the main players are within each sector, provide an understanding of new business opportunities within the these sectors and finally to understand the UK government’s strategy for space related activities and research. The sounding rocket and space tourism industries represent the two opposite ends of Starchaser’s business strategy and the information researched within this chapter will allow Starchaser to develop their business plan in order to execute their long term strategy. Warwick Business School – Executive Modular MBA Dissertation – 0262185 33
  34. 34. 3 Review of Literature 3.1 Introduction The following chapter will provide a review of academic literature researched for this dissertation. This review will be split into the two fundamental areas introduced in Chapter 2, namely the sounding rocket and space tourism market sectors. This dissertation is primarily focused on marketing, business strategy and entrepreneurship activities and therefore relevant MBA frameworks and tools will be employed to analyse the industry and company specific issues faced by Starchaser when they enter these market sectors. The sounding rocket market sector will be reviewed first. 3.2 Review of the Sounding Rocket Market Sector As discussed earlier in Chapter 2, the sounding rocket market was initially conceived to service the demand from research and educational institutions for a microgravity based research platform. Most of the academic research that has been conducted in recent years has been to understand the potential ‘uses’ for microgravity and the ‘need’ for microgravity based research platforms. The microgravity sector has been constrained for a number of reasons, for example a lack of low cost launch providers and government policies on providing access to these facilities. Even though Starchaser are hoping to establish a non government funded business model, most of their market opportunity actually comes from the scientific and research communities, which are primarily supported by government grants. 3.2.1 Microgravity & Sounding Rocket Industry Analysis Today’s European sounding rocket industry is dominated by ESA sponsored launches from Northern Europe. The main competitive advantage that Sweden has is that it has access to a large area of uninhabited space where sounding rockets can be launched. As a result of these facilities, the Swedish government has been very supportive of companies wishing to enter the sounding rocket industry and as such provide favourable grants to help new space related companies establish themselves in this region. By comparison, the UK government has a completely different attitude to supporting the microgravity and associated sounding rocket industry. Some of these reasons were discussed in Chapter 2, but the following PEST analysis of the microgravity and sounding rocket industry summarises the issues from a political, economic, society and technology standpoint. Warwick Business School – Executive Modular MBA Dissertation – 0262185 34
  35. 35. Fig. 19 PEST Analysis of the UK Sounding Rocket Industry Over the years the sounding rocket industry has seen many new entrants into a market which was once dominated by the larger space agencies such as NASA. Over time, smaller companies began to emerge who subsequently took over from where the major agencies left off. Today, NASA sub-contracts out the manufacture of the rockets for its sounding rocket programme and numerous other companies have emerged, primarily in the U.S and Europe, to compete in this specialised industry. The PEST analysis in Fig.19 provided a high level overview to the industry as a whole and the companies competing within this industry are analysed by way of Porter’s Five Forces [17], illustrated in Fig.20 below. Fig. 20 Porter’s Five Forces Analysis  New Entrants – The space industry has always been perceived as a technically challenging and high cost industry to enter. For this reason there are relatively few companies involved in this industry. Government red tape, flight safety and operational licenses from the respective aviation industry bodies all add to keeping Warwick Business School – Executive Modular MBA Dissertation – 0262185 35
  36. 36. the entry barrier high. Space launch system projects are also perceived as offering risky investment opportunities and so many projects require private investment to prove capability before investment houses are willing to provide funds for growth  Supplier Power – One of the key components of any sounding rocket is the engine. Today, both NASA and ESA use rockets powered by ex-military rocket motors. These motors are in short supply and the industry needs new rocket engines such as the Brazilian VSB30 to secure the future of the sounding rocket market sector.  Buyer Power – In recent years the buying power has shifted from individual research groups launching their own rockets to the larger space agencies sub-contracting out the manufacture of their own sounding rockets to companies such as Orbital Sciences. Most sounding rocket launches today are carrying scientific payloads developed by universities which in turn are indirectly funded by various governments. Government has the ability to control grants awarded to research groups and hence limit the number of potential launches that can be conducted  Threat of Substitutes – In recent years a number of private companies such as Orbital Sciences and SpaceX have developed lower cost rocket launch systems. In addition, the emerging space tourism industry may see companies such as Virgin Galactic using their space tourism vehicles to not only carry passengers but to also carry scientific payloads for deployment during apogee.  Competitor Rivalry – As NASA and ESA have largely sub-contracted out most of their sounding rocket programmes, most of the competition in the market is between companies such as Orbital and the Swedish Space Corporation. As these organisations receive significant space agency contracts, they are very well funded. Sounding rocket manufacturers who have a good safety record and undertake work on behalf of a space agency tend to win the lucrative high profile launch contracts. 3.2.2 UK Microgravity Research Policy In order to understand the potential market demand for a UK sounding rocket service it is important to understand the UK government policy concerning microgravity based research. In 2002 the UK government wanted to obtain a better understanding of the potential of microgravity based research and a microgravity review panel was established to examine the potential opportunities for microgravity based research. The review panel was headed by Professor Bill Wakeham, Vice Chancellor of Southampton University and Chairman of the BNSC Life and Physical Sciences Network Group. The review panel subsequently asked the BNSC and the Rutherford Appleton Laboratory to establish the ‘market demand’ for such a service. Warwick Business School – Executive Modular MBA Dissertation – 0262185 36
  37. 37. The Rutherford / BNSC report [1] noted that from a historical perspective, the life and physical sciences research areas, (that exploit microgravity conditions), have never been a high priority in comparison with other UK space related activities. One of the initial academic research studies, the Pippard Report [18] , was conducted in 1989 by Professor Sir Brian Pippard on behalf of SERC and it concluded that there was no strong case at that point for the UK to join the ESA microgravity programme. Whilst many European countries signed up with the construction of the ISS, the UK declined becoming involved with this project. This negative attitude to any involvement with microgravity and the ISS continues to this very day, with the government’s current space policy centred on “putting space to work”, ie needing to identify clear scientific or commercial benefits from space activities before participating. The microgravity review panel concluded [19] that there were a number of scientific opportunities for microgravity based research and these were divided into six disciplines, namely fundamental physics, fluid and combustion physics, materials science, biology, physiology and astro/exobiology and planetary exploration. (The leading academics involved with these areas of research were contacted as part of the research for this dissertation and the results of the survey are discussed in Chapter 4). In May 2000, ESA commissioned a strategic marketing study on the potential industrial opportunities for microgravity based work. This was conducted by Batelle ITM, Cranfield School of Management and Access-Matrix. The common overall conclusion from these independently conducted studies was that the tangible commercial returns in the field of microgravity were far from being mature. They forecasted that the need over the next 5-10 years is for state sponsored basic research to establish a background from which a partnership between industry and government can proceed to demonstrate potential, and then for a similar further period before genuine commercially sponsored R&D would be attainable. The falling number of students choosing to study science and technology subjects at university is a matter of widespread and growing concern in UK industry. Subjects which involve space research are effective at generating interest in young people. One advantage of having a UK microgravity research programme would be the opportunity to generate more interest in science and technology amongst the young generation in particular. At the time of the microgravity review panel research, the UK had a number of options with respect to establishing a microgravity research programme, namely [19] :- Warwick Business School – Executive Modular MBA Dissertation – 0262185 37
  38. 38.  Join ESA Programme (ELIPS), which would provide access for UK researchers to European collaborations and facilities and provide significant commercial space contracts to UK companies  Collaborate with NASA, this would only be possible if the UK were to become a member of ELIPS  Collaborate with other U.S Agencies, this would allow UK institutions to make their own arrangements but they would have to source their own funding rather than depend on a central funding system  Use facilities of a commercial basis, Individual research groups would be free to make use of ISS facilities either through ISS partners of one of the commercial agents. Similarly most other microgravity facilities could be hired commercially from the operators  Do nothing – Naturally the lowest cost option but there would be no involvement in research or industrial collaborations, no access to results and more importantly a poor political impression of the UK as a world-class player Upon reviewing the available options, the review panel recommended to the UK government that they should join the ELIPS programme at the minimum membership level. They believed that while there was no single scientific area where such an investment would lead to a real breakthrough there were a number of areas where access to this complimentary tool would be of value. In May 2003 the UK government reviewed the panel’s report and based on the findings decided not to sign up with the ELIPS programme due to limited budget availability and lack of demonstrable commercial benefits to be gained [20]. The government also highlighted the problems with the ISS and the issues associated with getting suitable launch vehicles, such as the Space Shuttle, up to the ISS. The potential issues faced with establishing a microgravity industry in the UK can be summarised by way of the Porter’s Diamond [21] shown below in Fig.21 Fig. 21 Porter’s Diamond Summary of Potential UK Based Microgravity Industry Warwick Business School – Executive Modular MBA Dissertation – 0262185 38
  39. 39.  Factor Conditions – In terms of location, Starchaser are well positioned to take advantage of a good network of suppliers, contractors and skilled workforce. Starchaser have all the required resources to be able to construct their sounding rockets however the one major drawback is a lack of launch facilities in the UK.  Demand Conditions – The UK demand for sounding rocket services is relatively low due to limited commercial opportunities and scientific research projects have limited budget availability to fund microgravity related launch programmes. This will not change until the government changes its policy towards microgravity research.  Related and Supporting Industries – Even though the UK does not have its own microgravity programme, it does have a strong presence in other space sectors such as satellites, deep space exploration probes and participation in other major European space projects.  Strategy, Structure , Rivalry – As of January 2006 there were no other UK based manufacturers of sounding rockets. Starchaser have a good opportunity to become the only major player in this market sector, however key to the growth of this part of the business is going to be acquiring new microgravity launch customers Therefore we can conclude from this that the weakest area is related to microgravity demand conditions in the UK, apart from suitable launch facilities the factor conditions are relatively high. The remaining two factors, related and supported industries & strategy, structure and rivalry are the strongest factors relating to microgravity activities in the UK. Based on these findings the main issue facing the government’s support of microgravity based research is the lack of funds to support what is perceived as a high cost programme. If the launch costs could be brought down, thus increasing demand for such launch services, then there is the possibility that the government would eventually support such a programme providing that there is no long term tie in. This was the main issue surrounding the ELIPS programme, namely committing to a five year rolling programme where there was no visible downstream benefit to the UK from a commercial point of view. If private enterprise companies such as Starchaser can make this financially viable then this should help to increase interest and demand for such launch services. 3.2.3 Review of Starchaser’s Sounding Rocket Programme Since Starchaser was formed in 1992 they have produced and successfully flown numerous rockets, with each design becoming progressively larger and more technically advanced. This step by step evolution of their designs has allowed Starchaser to focus on getting each technical issue resolved before moving onto the next step, eg incorporating telemetry systems, parachute recovery systems and ensuring that each engine design has suitable Warwick Business School – Executive Modular MBA Dissertation – 0262185 39
  40. 40. thrust to lift the rocket to the required altitude. This demonstrates the confidence that they have to push the boundaries with rocket development and prove that private enterprise is capable of establishing a business in this market sector. Starchaser have progressively increased their work force to meet the challenges of developing more complex rockets and they have defied the odds in terms of raising the necessary financial security to get the business to where it is today. They have been able to retain key members of staff and encourage more people to join their operation. Fig.22 below summarises the current situation at Starchaser and highlights the key strengths, weaknesses, opportunities and threats facing Starchaser at the moment. Fig. 22 SWOT Analysis of Starchaser Industries Sounding Rocket Business As a company, Starchaser has one key advantage over its competitors, namely it’s ability to manufacture the rocket body and engine in-house, thus allowing Starchaser to retain control of the entire design process and guarantee rocket motor supply for their Skybolt programme. Most other sounding rocket manufacturers would traditionally outsource rocket motors rather than build their own, but the number of off the shelf rocket motors is dwindling very quickly, thus putting Starchaser in an increased competitive position. Warwick Business School – Executive Modular MBA Dissertation – 0262185 40

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