MAN133 International Business Issues and Practice Assignment Sample 2023
Introduction
The present report is going to be on the discussion of international business issues and practices for SpaceX in the US. In this recent time, dealing with international business challenges has become important to get a competitive advantage. This report is going to discuss the major risk factors decided by World Economic Forum (WEF) and these are economic vulnerability related issues and technological instability. SpaceX has taken multiple measures to mitigate these challenges and the strategies applied by them will be discussed in this report. Furthermore, some recommendations will be provided to improve the business policies of SpaceX. The recommendations will be helpful for dealing with the existing and potential challenges of the company.
Background of the company
Space Exploration Technologies Corporation (SpaceX) is an aerospace manufacturing company based in the US. It was established back in the year 2002 by Elon Musk for reducing the overall transportation cost for space travels. SpaceX manufactures and launches high technology supported rockets and spacecraft for the exploration of space. This company has over 7000 employees including scientists and other supporting staff. It has contact with NASA for manufacturing of rockets and other essential spacecraft. As depicted in the study by Trujillo (2017), it has 87 missions the starship of SpaceX is one of the current projects running under this company which is able to transport both crew and cargo to the orbit of the earth, moon, and Mars and beyond. Starships are designed to carry satellites and collaborate with several NASA projects (Miyajima, 2017).
SpaceX has a total market capitalization of 33.3 billion US dollar. As discussed in the report by Sheetz (2020), SpaceX was the top rocket company last year in terms of revenue and it has registered total global revenue of 2 billion US dollar. The mission of this company is to enable people to live on other planets (SpaceX.com, 2020). It has not much competition in the market however, Boeing is considered as the biggest competitor of SpaceX.
Organizational challenges and strategies
1. Economic vulnerabilities
Challenges
Financial or economic risk is considered as a significant challenge that damages the business of an organization. In the World Economic Forum Global Risk Report of 2019, the economic vulnerability has been identified as a major challenge for the development of an organization. As discussed by Kathan et al. (2016), economic risk or vulnerabilities of an organization refers to the change in the microeconomics conditions such as government regulations, exchange rate and political instability. These WEF risk factors eventually affect the investment of an organization as investment is based on the economic stability of the nation. Other issues such as intense competition and new market acquisition can make a company economically vulnerable. SpaceX is well known for its legacy regarding the spaceship capability of carrying hundreds of passengers to Mars.
SpaceX has launched one of the most powerful spacecraft in the history of humanity named Falcon Heavy Rocket. The space ship developed by SpaceX is setting new standards for the space launches in future. The most important quality of the spacecraft is the capability of payload similar to five double-decker buses of London. The aircraft has everything from visual appeal, cheap cost and technological advancement. However, the issue of the environment has not been addressed.
However, in order to achieve the objective, the company is putting all the financial effort on an ambitious project. According to Masunaga (2019), SpaceX is looking forward to selling broadband service, which will be delivered by more than 1000 small size satellites. However, financial risk is one of the biggest challenges that Elon Musk’s SpaceX may face in the process of achieving the objective. The financial risk factor has one of the highest impacts in the WEF list of risk factors. As cited by Ogutu and Kihonge (2016), existing economic vulnerability is the major reason behind the emergence of financial risk. The emergence of financial risk can affect the overall business of an organization. Besides, an organization may find it difficult to achieve the organizational goal due to the presence of economic issues. In the case of SpaceX, the economic vulnerability has created a hurdle in the process of spaceship development.
SpaceX is facing severe issues with the cost of software and hardware in a new potential market. It has been aimed by the company to provide broadband services to the United States and other countries around the world. The broadband coverage of the company will include certain areas that are presently unserved by networks or the underserved areas. Currently, the main goal of the company is to provide broadband services to customers all around the world. However, in the middle of June, Elon Musk announced that the objective of the company is based on providing internet connection to semi-rural and rural areas (Masunaga, 2019). In other words, the main focus is on the areas that do not have any internet connection. However, the company was unable to achieve the objective of providing internet service around the world.
The issue of finding a new market is one of the reasons behind the financial risk of the company. On the other hand, competition in the market has affected the financial vulnerability of the company. According to Masunaga (2019), many companies such as Amazon, OneWeb and TeleSat are planning to launch their own satellites to provide broadband services to the company. The emergence of the company would increase the number of satellites that are orbiting around the Earth; therefore, the competition will get intense. As a result, the financial profitability of the company can be affected by the increasing competition in the market. In this regard, a question arises whether SpaceX can outperform its competitors or not.
The increasing competition in the market is directly related to financial or economic risks of the company. The emergence of companies such as Amazon and Telesat may affect the financial performance of SpaceX. Apart from this, pricing and cost of the products and services of a company may be influenced by the increasing competition in the market (Malesios et al. 2018). The increasing issues of market acquisition and existing competition can affect the business objectives of the company.
It is the recession stage in the world economy and slow growth of economy is one of the major risk factors in the WEF list. SpaceX is having financial risk due to this recession. Investors do not want to invest money in this stage due to high risk associated with the return of the money. As per the report by WEF, almost 73% of the people think that in the year 2020 this risk factor will be increased which is a major risk for SpaceX (Masunaga, 2019).
Pricing has remained as one of the biggest concerns of the company. It has been advertised on the website of the company that the average cost of Falcon 9 launch is around 57 million US dollars (Malesios et al. 2018). It indicates that the cost per pound to orbit is 2500 dollars. It has been found that the cost of the rocket launch is comparatively lower than other Aerospace companies in the US. The price of the rocket launch is even lower than China’s low cost rocket named Long March. It has been said by the officials that Long March cannot beat SpaceX in terms of pricing.
It was claimed by Elon Musk that he is going to lower the cost of a Falcon rocket to 1000 dollar per pound to orbit. As discussed by Masunaga (2019), Elon Musk had said that the performance of the rocket will improve with the passage of time. On the other hand, the cost and price of the rocket will decrease significantly. However, after a decade the company has failed to deliver what was promised before. The company has not even filed a patent to prevent the details of the rockets from being exposed. In today’s economy, cost cutting has become an essential for strategy for gaining competitive advantage. Inability of SpaceX to cut down the cost as promised may affect it economically.
It has been observed by space policy analysts that cost is considered as a major hurdle that limits a company from accessing the space. According to Ogutu and Kihonge (2016), expensive rockets and launching processes are the major reason behind the inability of most of the countries around the world to explore space. Adoption of the cost reduction policy of SpaceX has helped the company to deal with major economic challenges. It has also contributed to change the face of the space policy of the US. Overall barriers to explore space are reduced with the help of the cost cutting strategy of the company. Eventually, it is helping the company enhance its economic vulnerabilities and achieve the organizational goal.
Strategies
SpaceX is taking multiple steps in order to prevent economic vulnerability. One of the most influential steps that have been taken by the company is laid off. As per Foust (2019), SpaceX is all set to lay off around 10% of the total workforce, which is considered as the cost-cutting move of the company. The cost-cutting strategy of the company is mainly focused on the development of satellite broadband constellation and next-generation launch system. It has been announced by SpaceX in 2019 that the company is going to lay off a certain portion of the workforce. It has been considered as the first high-scale workforce layoff of the company since 2002 (Foust, 2019). It has been stated by the management of the company that in order to achieve the organizational goal of development of spacecraft and space-based internet systems, SpaceX is required to become a lean company.
The main priority is given to the cost reduction strategy by Elon Musk in order to deal with financial risks and gain competitive advantage. The strategy of cost reduction consists of a process of gathering large cross-section expertise and utilizing them to trim the fat of the company. It has been tried by NASA for decades to use low-cost space ships, which have turned out to be a failure of the promise of the SpaceCraft. It was mainly a recycle process that does not develop expensive new rockets for each launch. Based on the past experience regarding the cost cutting of NASA, SpaceX learned about the major factors of cost reduction strategy.
The action of laying off is taken in order to deal with future challenges such as cost and price efficiency and bankruptcy. The company has not revealed anything of near-term economic problems in this regard. However, as mentioned by Foust (2019), the layoff is the process of relocation and cost-cutting that helps an organization to deal with economic vulnerabilities. The cost reduction strategy of the company is mainly based on the modification of fuels and engines. On the other hand, the major breakthrough of the company is recovering and reusing the process of rocket launch. The company is focused on developing spacecraft that can be recovered and reused easily. Therefore, the cost of the services gets automatically reduced.
In order to deal with the financial challenges, the company is looking forward to raising new funds of around a quarter billion dollars. As cited by Sheetz (2020), it will be a critical year for the development of three major projects of Elon Musk’s company SpaceX. At a price of 220 dollars a share, the company is seeking to bring around 250 million dollars of investment to achieve the organizational goal. Investment or funding is a crucial component that helps an organization to deal with any kind of economic obstacles. Investment plays a significant role in improving productivity and increasing its competitive advantage. A company can improve its financial condition with the help of funding and investments.
The new raise in the funding and investment of SpaceX would value at approximately 36 billion US dollars. The value of new funding would increase from 33.3 billion US dollars previously (Sheetz, 2020). The funding raising strategy of the company will be essential for reducing the economic vulnerabilities that affect the objectives of the company. Based on the strategies of cost-cutting and fundraising, SpaceX is developing its business strategies. These two strategies of the company will be essential to deal with any kind of economic and financial vulnerability.
2. Technological instabilities
Challenges
Technological instability is considered as one of the biggest issues in this recent time. WEF has identified technological risks such as cyber security, data privacy, internet money heist and many more. In this digital era, people are using technologies in their daily life and thus all the companies are trying to develop in technological aspects. According to the study by Patel (2019), every day new technologies are investing and companies are facing difficulties to keep themselves up with the best available technologies in the market regarding space exploration. SpaceX is an aerospace organization, which uses high technologies. However, they are also facing difficulties due to the technical instability in the market.
SpaceX faced technical difficulties due to unstable technology back in the year 2013 with Dragon Spacecraft. It is known that for a mission there are requirements of planning and resource collection. However, in the middle of the project, many new technologies are invented by different organizations and it is tough to implement new technologies in the middle of any project. However, new technologies are beneficial for the project and still cannot be implemented due to difficulties. As discussed in the study by Etherington (2020), Dragon craft faced issues due to thruster blockage however; it was handled by the engineers. In case of availability of new technologies for blockage detection, these difficulties can be avoided.
One of the major technical issues faced by SpaceX was the blast of a crew dragon in the launchpad. Due to a leakage in the propellant valve this blast happened which was a big financial and psychological loss for this company. Incorporation of unstable technology is the main fault behind it and also leakage detectors did not work properly which caused this accident. As mentioned in the study by Clark (2020), in their Starlink mission of 2020 they faced issues in the engine of the spacecraft.
The Single Merlin Engine of Starlink failed at the time of launching 60 satellites. However, the mission did not fail as Falcon 9 has 9 engines and in case one did not work the other can run the mission. This is also a technological difficulty faced by the company. Later on, it has been confirmed that this issue has happened due to cleaning fluid in the engine. These technological difficulties are one of the highlighted issues faced by SpaceX.
SpaceX faced risks related to data privacy and thus invested on new data privacy firewall as a technological up gradation faces the WEF risk factors. Besides, there are many online transactions occurred through the internet for the business deals and other purposes. The current threat of cyber attack and internet money heist is a major concern for SpaceX.
SpaceX faced major difficulties in organizing space missions due to the risk factors of WEF. In the international market spacecraft need to use the most advanced technologies for the success of their mission. The overall cost of a space mission is huge and highly supported by the government. According to the study by Zhao (2019), the US federal government is focusing on space missions for exploration of Mars and the south segment of the moon. These missions are supported by billions and dollars and with the technological instability, the success is difficult. In order to make the space mission successful, it is essential for the organization to focus on the technological possibilities. Presence of technological instabilities does not only affect the objectives of space travel but also influences the expectations and needs of the customers (Talwar, 2018).
The Starling project with Falcon 9 is the upcoming project of SpaceX, and due to technical issues, it has been delayed. The R&D department is trying hard to stabilize the technologies however, in this technological evaluation it is not possible to control the growth of technologies. Thus SpaceX is facing multiple issues regarding it such as financial burden due to late launch, a loss for the blast of spacecraft, engine difficulties and many more. The increasing issues of the technology are preventing its promise to reach spaced in a cost efficient manner. Lack of technological innovation indicates the failure of the R&D department of the organization.
The engine of SpaceX used to be considered as the efficient and reliable performer. The failure in the engine of Starlink has raised concerns regarding the technological efficiency of SpaceX. The incident of engine failure of Starlink is a clear indicator of technological instability in the system of the company. However, it is assured by Elon Musk that the technical issue will be investigated in detail by the SpaceX team.
The investigation will be done to find out what exactly happened with the engine of Starlink. According to Foreman et al. (2017), the statement of Elon Musk does not demonstrate the intention of the company clearly. However, it can be understood that the correction in the system will be keeping the future launches in mind. SpaceX is looking forward to preparing for the first ever human spaceflight having a commercial crew. In order to make it successful, the company needs to pay attention to technological efficiency.
Such instability brings new competitions in the market with more advanced technology which is challenging for SpaceX. NASA, Boeing and many other organizations, manufactures the newly developed spacecraft technologies. Therefore, this instability brings high competition for the development of space transportation. Instability in technology is bringing delay in the projects as new inventions are highly appreciable and effective for space missions. As mentioned in the study by Foreman et al. (2017), the demand from the government is also increasing as new technologies ensure more accurate information and cost effectiveness. Considering all these factors it can be said that due to this instability of technology SpaceX is facing many major and minor issues.
Strategies
Investing in upgrading technologies is one of the major aims of SpaceX to deal with technical difficulties. They raised a fund of 1.33 billion US dollar for their spacecraft mission in February 2020 from three rounds of funding. Based on the study by McDowell (2020), they are targeting to collect about 250 million US dollar from the share market to raise its total market capitalization from 33.33 billion US to 35 billion US dollar. This is done to organize the upcoming space projects of SpaceX. In order to get rid of the technical difficulties, this organization makes strategies to formulate new technologies for their spacecraft such that they can achieve technical stability till the end of the project. Investing a huge amount in the R&D sector is considered as one of the most used strategies used by SpaceX.
SpaceX is using most advanced technologies in the market and applying these technologies after approval from their R&D department. SpaceX has used the automation in the spacecraft for reducing technical difficulties. Besides, they analyze the cause of the accidents by having a separate team to analyze the pros and cons of the missions which guide them to organize their upcoming missions. The R&D team of SpaceX is constantly developing the available technologies in the market such that they can stabilize the technological growth.
Besides, they are using big data technology to analyze the technological advancements throughout the world and to incorporate the latest technologies. As discussed in the study by Lin et al. (2017), financial planning is done by SpaceX also calculates the budget for mitigating the issues of technological instabilities. The financial planner proposes the budget incorporating these costs such that they do not face any financial constraints due to technological faults.
Recruitment process of SpaceX is one of the toughest as it is one of the best private space organizations in the world. It is one of their basic strategies to hire the best professionals in the market such that they can provide the best guidance for the space projects of SpaceX. This process is essential for the development of the organization and to provide employees with the opportunity to face new challenges. As depicted in the study by Zhao (2019), the fresh recruitments are mostly motivated and eager to learn new technologies which enable their invention rate. The recruitment process is essential for getting valuable and talented employees who can help the company to improve the productivity.
The new employees in the organization have the capabilities to face challenges and change the dynamics of the workplace which is essential for generating an innovative culture in this company. The technical team of this organization has an updated analysis of the developed technology and makes plans to collaborate these technologies with ongoing projects such that they do not face any technical difficulties. However, in order to enhance the technological innovation, the company is required to focus on its R&D activities. R&D is considered as the major contributor to the advancement of technology. In order to ensure the further development and achieve the business objectives the company is need to pay attention to R&D.
Recommendations
- It is recommended that training and development programs for the employees need to be continuous for SpaceX to mitigate the WEF risk factors. They have to train their employees such that they can be associated with the latest technological advantages as well as technical issues faced by the world. The development program should be organized for all the employees of SpaceX from high to a low level. SpaceX organizes training programs however; continuous development is not associated with these programs. This is relevant as introducing the latest inventions can make their employees think in a diverse way. This continuous development program is going to need support from the higher management of the company. It is the need of the hour for the company as it is focused on the developing human spaceflight.
- It is recommended to establish a viable space economy such that the risks factors of WEF associated with economic vulnerabilities and recession can be minimized. Investment and financial planning are required along the capacity of SpaceX to run more projects. It is recommended that they ask for government support for giving them the financial backup for future projects. Besides, they need to organize fundraising programs to collect more funds and attract investors by showing them the future of their projects. In order to implement this recommendation, it is essential to have expert support in terms of financial planning and fundraising programs. In this time of recession, it is not possible to attract investors without showing a surety of return and for this aspect, higher management should build a team to run the investment raising project.
- Government private collaboration is recommended such that best people from all the organizations work together to achieve space exploration projects to fight with the WEF risk factors. It is essential to stabilize the economic issues by collaborating with government agencies. In order to develop a spacecraft, it is important for a company to have sufficient funds to support the process. Collaboration with the government would be crucial for generating a sufficient amount of funds. Investors will be more attracted as there will be an assurance from the government end. Implementing these recommendations is going to need support from both the government and managers of private companies. Eventually, the overall goal of the company to explore the space can be achieved without facing any kind of hurdles.
- In order to minimize the issues mentioned in the WEF risk factors list, it is recommended to focus on sustainable development of the organization. Government guidelines for the sustainable development of organization include plantation of trees, reducing the emission of carbon, recycling wastes and many more have to be followed by SpaceX to reduce the environmental issues. It is going to take a lot of investment in reducing and recycling of wastes. A proper utilization system for the waste of space craft manufacturing will be needed to implement this recommendation.
Conclusion
Based on the above discussion it can be concluded that SpaceX faced major issues from economic, environmental and technical aspects. It has been found that they have economic difficulties due to unstable economic conditions and thus they are cutting the costs and reducing employee burden from their company. Besides, carbon emission of SpaceX is high and thus to minimize this environmental polluting factor they are developing less fuel consumption rockets. It has been seen that their reusable rockets are efficient as well as help to reduce pollution.
It has been seen that they had technical issues in their projects of Dragon spacecraft, Starlink and many more. It has been found that these issues happened due to technical instabilities and they managed these issues by applying proper strategies. Hiring new employees, investing in the R&D department and incorporating new technologies such as big data, automation and many more are the strategies taken by SpaceX to bring technological stability. Continuous development of employees, government-private collaboration, sustainable development and many more have been recommended to SpaceX for the development of the organization.
References
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