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Environmental Analysis of the National Aeronautics and Space Administration (NASA)

Coast2Coast Consultants

College of Integrative Sciences and Arts, Arizona State University

OGL355: Leading Organizational Innovation and Change

Dr. B

October 29, 2020

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Environmental Analysis of the National Aeronautics and Space Administration

At Coast2Coast Consultants, context is important to us. The purpose of this document is

to analyze the environment of the National Aeronautics and Space Administration (NASA). In

order to better understand NASA's position in the space industry, we will look further into key

elements that influence the organization. We begin with an industry analysis utilizing Michael

Porter’s Five Forces Model of Competition. We will discuss the five categories and designate an

appropriate threat level for each according to our research. Our analysis continues as we identify

NASA’s target market and its characteristics. We also discuss any competitive advantages that

NASA might have as well as strategies for maintaining their target market.

Industry Analysis

An industry analysis can be used to help organizations understand their position in the

market relative to their competitors (Industry Analysis, 2020). Organizations can utilize the

industry analysis to identify any threats and opportunities they may face as well as directing the

capability of their resources. By understanding and applying the results from an industry

analysis, organizations are in better shape to formulate strategies toward gaining a competitive

advantage (Industry Analysis, 2020).

Porter’s Five Forces Model of Competition was developed in the late 1970s and, as the

name implies, describes five forces that shape industry competition. In this section, we will break

down the threat of new entrants, the bargaining power of buyers, the bargaining power of

suppliers, the threat of substitute products, and industry rivalry as they pertain to NASA. We will

discuss NASA’s position in these categories and designate each with an appropriate threat level.

Although not recognized as one of Porter’s five forces, government regulation can be seen as a

sixth force of industry competition (Guthrie, 2013). As a U.S. government agency, ever-
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changing regulations and funding have a tremendous impact on each of Porter’s five forces as

they pertain to NASA.

Threat of New Entrants

NASA’s unique position as a government agency sets them apart from private companies

in the industry, therefore we have assessed the threat of new entrants to be low. It is not to say

the threat is nonexistent but is not significant in comparison to other industries. Although private

companies like SpaceX and Blue Origin are entering into space exploration and satellite

deployment, this industry is predominantly occupied by government agencies rather than private

companies. In fact, NASA has challenged private companies to help them develop the next

generation of cargo modules and capsules suitable for human occupancy (Harbaugh, 2020).

Furthermore, the low threat of new entrants is justified by several other key elements.

First and foremost are the capital requirements needed to enter the space exploration, space

travel, and satellite deployment business. The advantage NASA has over new entrants is

government funding. NASA is not required to have a return on investment, nor are they bothered

by shareholders looking for a timeline or path to profitability. According to Porter’s Five Forces

Model, being backed by the U.S. government gives NASA an advantage when obtaining

resources. For example, proprietary technology, preferential access to raw materials, and access

to the most favorable locations. Porter (2008) identifies brand identity as a barrier to entry.

NASA has over 60 years of experience under its belt and has established world-class fame.

Lastly, our low threat of new entrants was determined by restrictive government policies

as they refer to space exploration. Along with U.S. policies are those of the United Nations

Office for Outer Space Affairs (UNOOSA). The UNOOSA is responsible for upholding Space

Law including the rules, principles, and standards of international law set forth by treaties and
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principles of the United Nations. While space travel and tourism are emerging markets in the

private industry, it would be difficult for new entrants to compete with the power, support,

resources, and credibility NASA already has. It is for these reasons we have determined the

threat of new entrants to be low.

Bargaining Power of Buyers

According to Porter (2008), buyers have power if products are standardized. Buyers are

also powerful if they can create the product themselves. The power of buyers belongs to

customers, or groups of people who can control the competition between organizations. They

usually have the power to demand more or less from businesses and services. In NASA’s case,

the product is knowledge and innovation which cannot be standardized.

The customers of NASA are the global population. Humanity benefits from the

knowledge produced by NASA. However, those who dedicate their time to research and

development within NASA hold power over how the information will be used. In this instance,

buyer power is high and supports the idea of the intermediate buyer. This leads to discovery and

innovation in multiple markets and organizations.

In the 2018 strategic plan, NASA describes how the information they produce is used

throughout industries and academics (NASA, 2018). NASA holds an enduring reputation and the

information they publish propels our future. Buyers are not in a position to dictate terms to

NASA about how information is gleaned and must be satisfied with the data produced. This is

another reason buyer power is low. Buyers can truly only demand that NASA continue to

research, explore, develop, and continue to publish the data for public use.

One caveat would be intermediate buyers. These are not the end users, so they have more

influence on how to use products or knowledge (Porter, 2008, p. 84). Any data gained will be a
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discovery and need to be analyzed for capabilities and risks. As NASA states on their customer

service plan (2011), “these opportunities deepen the public's understanding, appreciation, and

ownership in the NASA mission. In turn, these opportunities tap into the nation’s creativity and

capabilities”. Organizations across many industries past, present, and future have and will

continue to benefit from the work of NASA.

As their strategic goals describe, NASA maintains a large and diverse set of technical

capabilities and assets to support our missions, other Federal agencies’ work, and the private

sector to test, validate, and optimize innovations” (NASA, 2018, p. 30). NASA publishes their

data so people may see and learn, therefore a sudden halt in publishing new information would

provide a platform to change the bargaining power of the buyers. Therefore, while the bargaining

power of the global population is low, the bargaining power of the population learning the

information is higher. For these reasons, we deem the bargaining power of buyers to be low but

on the rise.

Bargaining Power of Suppliers

According to Porter’s Five Forces Model, resource providers have bargaining power

depending on the demand of the products, resources, or services provided (Coulter, 2013, p. 67).

Simply put, when there are more sellers than buyers, the bargaining power of suppliers is

lowered. Ultimately, the government is NASA’s main supplier of capital. As stated previously,

there are many benefits that come with being a government-funded organization. With the

desirability of government contracts, NASA has built a long list of suppliers over the years.

Rather than seeking out buyers, NASA has suppliers fighting for government contract

opportunities which lowers their bargaining power. If we look at the Orion spacecraft alone,

there are contributions from over 3,800 suppliers (Payne, 2020). With such a large number of
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suppliers from all over the world, we believe that the bargaining power of suppliers would

remain low and pose little to no threat for the organization as a whole.

Aside from supplier concentration, government policies and regulations limit the threat of

switching costs. According to Porter’s model, the presence of substitute inputs affect supplier’s

bargaining power (Kar, 2011). NASA forms and maintains both domestic and international

partnerships in which mutual benefits are achieved through collaboration. These collaborations

grant NASA “access to unique capabilities and expertise” (NASA, 2018). Ultimately, the

partnerships help stabilize the effects of switching costs because they provide a different revenue

of resources for key inputs. Therefore, from a different perspective, the bargaining power of

suppliers does not present a significant threat. With thousands of suppliers competing to do

business with NASA, inputs lose their uniqueness, supplier concentration is dispersed, and

switching costs remain low. The combination of all these factors reduce the bargaining power of

suppliers. As leveraging power is minimal, the bargaining power of suppliers is low.

Threat of Substitute Products

We have defined NASA’s product as the information made public through the

organizations own research, knowledge, and innovation. Therefore, we have assessed the threat

of substitution to be low and will explain why using Porter’s (2008) article, The Five

Competitive Forces that Shape Strategy. While NASA’s product is unique, they are not the only

space agency who publishes their research. NASA’s findings are freely given out, contributing to

the areas of helio physics, astrophysics, earth and planetary science, life and physical science,

health, and technology development (NASA STI Program, 2016).

As previously mentioned, NASA has encouraged others in the industry to get involved in

their mission, not as substitutes but as partners. These partnerships make the threat of substitute
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products low because NASA does not charge for the research it obtains. NASA views its

research as advancements for humanity rather than a money-making endeavor. An increase or

decrease to the funding they receive may affect NASA’s progress, but the overall threat of a

substitute for NASA’s product is very low.

Industry Rivalry

At the heart of Porter’s Five Force model is industry rivalry. Rivalry among competitors

is always changing, according to how each of the other forces are affecting an organization.

Rivalry tends to increase over time and is often reshaped with new technology (Porter, 2008, p.

88). In the 1960s NASA’s primary rival was the Soviet Union, and the perceived threat during

the Cold War era was high. With a goal of reaching the moon’s surface, the intense competition

between nations, known as the “space race”, would be won by American’s in 1969 (Mansfield,

2012).

Today, competition among nations in space has evolved into more of a partnership with

the International Space Station (ISS). The primary driver for cooperation between the United

States, Russia, Europe, Japan, and Canada is simple - the accomplishments of the ISS are as

much about human achievement as they are technological advances (Garcia, 2020). For members

of the ISS, industry rivalry comes second to the good of humanity and the threat is low.

In the United States, private companies like SpaceX and Blue Origin rival NASA in

many ways, however their missions are not the same. The private companies have focused on

reusability of rockets and spacecrafts, which in turn has helped lower the costs associated with

launching payloads into Earth’s orbit. From a cost perspective, the rivalry in the private sector

has been beneficial to NASA, laying the groundwork for new innovation and future

developments (Shackleford, 2019).

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Perhaps NASA’s biggest rival in space today is the China National Space Administration

(CNSA), governed by the People’s Liberation Army. Historically lagging behind the major

players in space, the CNSA has made great technological strides in recent years and has become

a concern for U.S. strategists. The CNSA currently launches more rockets into space than any

other country and in 2019 became the first nation to land a rover on the dark side of the moon.

The rivalry between NASA and the CNSA exists in the short-term with questions surrounding

military uses of space, and in the long-term with the exploitation of space resources (Couronne,

2019).

There are many rivalries in the space industry, and they exist on different levels. NASA

has benefited from industry rivalry in the private sector. On the ISS, industry rivalry has been

transformed into cooperative partnerships for the good of mankind. The rivalry that exists

between NASA and the CNSA is similar to the rivalries that exist between the U.S. and China.

China’s presence in space may have contributed to the formation of the United States Space

Force in 2019 (USSF, 2020). For NASA, the threat of rivals may not be as high as it was in the

1960s, but the rivalry among competing nations is alive and well. For these reasons, the threat of

industry rivalry is high.

Target Market

NASA is an organization that claims to market to everyone, however it is clear that

NASA’s real target market is the younger, tech-savvy, generation. NASA is heavily invested in

influencing the younger generation to become interested and involved in scientific fields, with

hopes of advancing the field of space exploration. More specifically, they are working to recruit

at a young age. With over 500 various social media accounts, NASA has the versatility to target
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whatever demographic they wish, but NASA has confirmed they specifically target younger

minds in an attempt to influence them to move into STEM fields (Griffis, 2016).

NASA’s social media manager, John Yembrick stated that NASA is so broad that it has

something for everyone. When asked specifically who he believed the target market was he

answered, “Humanity” (Borges, 2015). While this was an inspiring sentiment, and NASA does

encompass more than the average person would believe, having a target audience of the entirety

of humanity is inappropriate. Simply put, humanity is much too large of a demographic for any

organization to realistically encompass. Despite their global reach and multifaceted social media

campaigns, they do tend to neglect non-tech savvy groups especially when it comes to social

media. Due to the nature of social media marketing, older demographics do not exactly fit in the

range of people who are actively using social media which makes them an inappropriate target.

Competitive Advantage Strategies to Maintain Target Market

Considering the forces of competition and NASA’s target market, we believe NASA

could benefit from a short-run retrenchment strategy. An aggressive marketing campaign would

address their target market through social media. Placing an astronaut on a cereal box, or a

spacecraft in a happy meal, would go a long way in keeping their image, and staying relevant in

the public eye. In partnering with social media influencers, NASA could reignite interest in space

exploration. In recruiting the help of influencers, NASA could capitalize on the speed in which

social media spreads information. This strategy looks at the recent changes in our environment

due to the pandemic and accounts for the increase in time spent on the internet. Although NASA

is not in a state of decline, reminding people of their existence and their mission could benefit the

organization. The retrenchment strategies would inspire today’s youth, revitalize the

organization, and help NASA prepare for the battles of tomorrow (Coultier, 2012, p. 185).
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We believe NASA’s competitive advantage strategy to maintain their target market

differs from Porter’s traditional model. NASA’s competitive advantage lies in the benefits the

organization provides to our nation through its investments. These investments can be seen

throughout the economy, supporting critical industries, and creating new jobs. By continuing to

invest in their target market, NASA is deploying a concentration strategy. This strategy will

continue to promote STEM learning while developing leaders and innovators for the next

generation. By investing in the country and continuing to develop new technologies through

research, NASA can position itself to be a leader in space for the foreseeable future.

Another strategy for maintaining their target market is a hybrid concentration/horizontal

integration strategy with continued growth and expansion through partnerships. Growth, not in a

traditional sense of earnings and profitability, but in knowledge and partnerships with other

government and private organizations. Strategic alliances and partnerships revolve around four

key aspects of NASA’s strategic plan; to discover, explore, develop, and enable. Exploration

leads to discovery, which allows the development of new technology. All of these aspects enable

and expand the capabilities of our workforce and facilities, which help NASA achieve their

mission (NASA, 2018, p. 7).

NASA’s strategic partnerships in the industry and academics around the world support

their main strategic objective; “To discover and expand knowledge for the benefit of humanity”

(NASA, 2018, p. 11). Their strategy is not to beat the competition, but to encourage the

competition and younger minds to continue pursuing knowledge of space and science. In their

partnership with SpaceX, NASA is working with a competitor to return two astronauts to earth

after delivering them to the International Space Station (McFall-Johnson & Mosher, 2020). In

partnering with Blue Origin, their goal was to build the next generation of equipment capable of
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returning humans to the moon (Ferociter, 2020). Rather than try to develop this themselves,

NASA has encouraged private companies, even hosted competitions, to support their strategy of

maintaining space exploration, space travel, getting back to the moon and beyond. Strategic

alliances and partnerships make this possible and these growth strategies should continue to be

pursued by NASA.

Conclusion

To conclude our environmental analysis, we will summarize our industry analysis as it

pertains to NASA while reiterating their target market and the competitive advantage strategies

we identified to maintain it. We believe the threat of new entrants for NASA is low because of

the high capital required to enter the industry, NASA’s established brand identity, and the

influence of the U.S. government. These all act as barriers to entry that keep the threat level low.

The bargaining powers of buyers is low because they lack the ability to backward integrate and

their switching costs do not affect NASA as a government organization.

The bargaining power of suppliers is low because of the intense competition for

government contracts. The presence of numerous alternatives negates the power of suppliers,

with restrictions on switching costs and low supplier concentration. NASA’s products are unique

and are not concerned with the threat of substitutes. A change in funding would affect NASA’s

progress, but would not open the door for substitute products. The rivalry among nations today is

not as high as it once was with many nations leaning toward partnership and cooperation for the

good of mankind. However, rivalry in the space industry will never go away, and therefore we

label it high.

NASA’s target market is the younger, tech-savvy generation. By targeting this younger

generation, NASA can carry on its vision of discovering and expanding knowledge for the
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benefit of humanity. We believe NASA’s strategies for maintaining their target market include

continuous investments in the country and capitalizing on available social media channels

through creative videos or projects with trending influencers. Investments in the economy, the

space industry, and the younger generation will ensure success for years to come. Although the

NASA organization is not in decline, we believe they could benefit from a renewal strategy of

retrenchment. Another strategy is continuing to build partnerships and strategic alliances. We

have noted examples of NASA’s success through partnerships in the private industry. This

hybrid concentration/horizontal integration strategy will lower the costs associated with the

space industry while spurring innovation through friendly competition. These strategies will keep

NASA relevant in the public eye and allow them to maintain their position as an industry leader.

Each team member must update the name of those on the team and provide initials,

confirming and agreeing to “Environmental Analysis” stated above.

APPROVAL: (sign off with initials by 12pm AZ time 10/29/2020) - plan to submit by 1pm
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Michael Thomson - My Nguyen - Anastasia Darien Nieves - James

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ACM JE
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