Our client was a major aerospace firm interested in supplying satellites for a new communications venture. This project would entail the client setting up multiple ventures in the satellite communications field. There was no clear indication as to the potential profitability of the market, and therefore the demand for satellite suppliers
Our objective was to determine the profit potential for the satellite communications market and quantify sensitivities to assumptions about costs to supply and operate satellites. We also wanted to highlight issues around market development and timing.
Our approach was to first identify key drivers of the underlying costs for satellite communications vs. other competing technologies. We then identified those markets (services, geographies) for which satellite communications will be the cost advantaged technology. We projected the price points in these markets that would optimize profitability and aggregated the markets to determine total potential profitability.
To calibrate our estimates, we benchmarked our projections with top-down market estimates. We also adjusted our model, looking at different inputs to understand key cross-over points and the overall robustness of the model.
We delivered to the client a picture of expected profitability for the industry and helped the client focus its efforts on development issues in the industry. We gave them the essential understanding of key market development indicators which was then used to make a decision on whether or not to enter the satellite supply segment.