Component arrangement in space satellites is an important design process at the conceptual design stage, since component location influences a range of fundamental characteristics of a satellite, and design change in the latter detailed design stage is quite difficult. In this research, a preliminary study for development of systematic design methods for such component arrangement based on optimization techniques is conducted. The component arrangement design problem is formulated as a two-objective optimization problem, and this optimization problem is solved using a bi-level optimization procedure. At the first optimization step, the genetic algorithm is applied to obtain the approximate location of components, and the second step uses the successive quadratic programming to determine the detailed positions of the components. Furthermore, this paper proposes a competent genotype representation technique for handling a variety of component arrangement patterns during the genetic algorithm optimization process. Finally, the proposed method is applied to component arrangement design of a practical small piggyback satellite in order to illustrate effectiveness of the proposed method.