SpaceX, Economies of Scale, and a Revolution in Space Access

Case Solution

Matthew C. Weinzierl, Kylie Lucas, Mehak Sarang
Harvard Business School ()

Since transforming the world of online banking, Elon Musk had established himself as a fearless innovator eager to challenge the status quo in hopes of promoting what he called humane society. After selling to PayPal in 2002, he created a number of startups to help make that dream come true, starting with Space Exploration Technologies (SpaceX). Hoping to “make human life multiplanetar,” Musk wanted to establish the first Martian civilization, but couldn’t get rockets that were cheap or reliable enough to make the trip. Over the next decade, SpaceX would develop a series of revolutionary rockets that changed the commercial space launch industry. SpaceX leveraged reusable missiles to take advantage of economies of scale, reduced the cost of orbit by a factor of 18, and captured a large percentage of the global launch market that was once inaccessible to industry newbies. But after a remarkable decade, Musk’s original goal of reaching Mars seemed within our grasp and incredibly optimistic. SpaceX had proven technology that would be vital in supporting a manned mission to Mars, but the cost of getting there was estimated at more than $ 200 billion in 2014. While the revenue from the launch services market was impressive, it didn’t come close to the $ 200 billion needed to develop a Martian civilization. Would there be enough demand for launch services to make Elon Musk’s vision possible, or would SpaceX need to find other ways to get there?

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