Running head: SPACEX CASE STUDY 1

Robert J. Leitelt

BUS411 – Business Policy Seminar

November 22, 2020

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 SPACEX CASE STUDY 2

Introduction

The following paragraphs are designed to explore the case study of SpaceX found within

our textbook. This paper is formatted into sections intended to answer questions stemming from

this case study and incorporating lessons learned from chapters five and six. Elon Musk's

reputation has been at the forefront of technology since the 1990s. From the rise of the internet to

the automobile industry, Mr. Musk has consistently kept up with the world’s desire for

technological innovations. Academia and businesses worldwide not only studies Elon Musk’s

innovations in technological leaps but also dissect his business strategies as his ideas come to

fruition.

Elon Musk’s Motives for Creating SpaceX And Motives Influence Creating the Firm

Elon Musk’s motives for creating Space Exploration, or SpaceX, come from three

instances. First, Mr. Musk was disappointed upon realizing NASA was not considering a Mars

expedition. Second, Mr. Musk found out that NASA had the technology to go but lacked the

funding to do the mission. “Rockets could get into orbit, but they were expensive and typically

not reusable.” (Hill et al., 2019, p.C-145). Finally, after failing to purchase Intercontinental

Ballistic Missiles (ICBMs) from Russia, Mr. Musk “began developing a method that would

streamline the production of rockets that could be used more than once." (Hill et al., 2019, p.C-

145). These motives have influenced Mr. Musk to create a low-cost and reusable rocket and

reduce the turn around time for subsequent launches by not having to start from scratch each

flight. SpaceX is designed to be innovative and force out the efficiency frontier in this industry to

provide more differentiation at a lower cost than its rivals. (Hill et al., 2019, p.150).

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 SPACEX CASE STUDY 3

Elon Musk’s Strength and Weaknesses Creating SpaceX

Mr. Musk’s painted an image of himself as having an eye for niche products and services

such as PayPal, Tesla cars, and SolarCity. Each investment had its initial setbacks, and the same

is true for SpaceX, just like from earlier years with the falcon rocket launches, which were

plagued with unforeseen failures that had cast doubt on the possibility of SpaceX becoming

successful. Even when SpaceX was looming on the eve of bankruptcy, Mr. Musk maintained his

composure to the point when SpaceX received a $1.6 billion contract from NASA, essentially

stopping SpaceX from filing bankruptcy. Today, SpaceX dominates the rocket flight industry by

being the new entrant and undercutting their competitors with cheaper pricing. However, his

weaknesses include stagnation within the commercial markets where commercial space launches

are not a high demand. Another weakness in SpaceX’s future endeavors was held when the

company was not awarded a contract with the US Air Force. “SpaceX can still compete in the

second phase of the program, but it looks like the government will not be funding development

of a new launch vehicle or rocket engine for SpaceX.” (Thompson, 2018).

The Difference from SpaceX to Other Space Companies

SpaceX has proven to be a worthy new entrant competitor in the space exploration and

rocket development industry. To cut the costs of buying third party parts, which usually starts to

take away from cost-saving initiatives, SpaceX builds its parts where other companies do not.

“SpaceX decided instead to build many of its parts, or to buy parts not considered "space-grade"

and modify them to achieve "space-grade." For example, rather than paying $50,000 to $100,000

for an industrial-grade radio, SpaceX was able to build its own for $5,000, and shaved 20% of

the weight off at the same time.” (Hill et al., 2019, p.148). This leadership style is just one

example of Mr. Musk’s refusal to be cornered in a market dominated by businesses that have

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 SPACEX CASE STUDY 4

priced gouged 'space-grade' parts because other space companies were too lazy to invest money

into creating the parts themselves. “SpaceX’s willingness to experiment with new designs and

technologies was a huge competitive advantage. (Hill et al., 2019, p.148).

Opinion/Conclusion: Incumbent Space Companies Survivability and the Threat of Blue

Origin

SpaceX innovations with technologies have started a ripple effect that is causing this

industry to change its operations. “Vertical integration also gave SpaceX more control over when

and how things are done, making it significantly more nimble than traditional aerospace

companies, and having almost all of SpaceX’s engineers under one roof greatly streamlines the

process of designing, testing, and improving the launch systems.” (Hill et al., 2019, p.149).

Undercutting not only competitors, but SpaceX has also found ways to undercut suppliers. The

most prominent worry SpaceX faces in competition with Blue Origin is available revenue. Blue

Origin is founded by Jeff Bezos, who has a net worth of over $150 billion, and with this financial

backing, it reduces a variable that generally plagues new entrants in a competitive industry.

Despite SpaceX not having a Jeff Bezos as a financier, it has the other characteristics that place

SpaceX at the top of the rocket industry. If Blue Origin and the other incumbent space companies

want to survive in this industry, they must quickly catch up and outperform SpaceX’s pioneering

ideas before they become a reality.

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 SPACEX CASE STUDY 5

References

Hill, M. A., Schilling, M. A., & Jones, G. R. (2019). Strategic Management An Integrated

Approach: Theory & Cases (13th ed.) [E-book]. Cengage Learning.

https://post.blackboard.com/webapps/blackboard/execute/blti/launchLink?

course_id=_99242_1&content_id=_6009776_1

Mann, A. (2020, May 27). SpaceX now dominates rocket flight, bringing big benefits—and risks

—to NASA. Science | AAAS. https://www.sciencemag.org/news/2020/05/spacex-now-

dominates-rocket-flight-bringing-big-benefits-and-risks-nasa

Thompson, L. (2018, December 11). Five Existential Challenges Facing Elon Musk’s SpaceX.

Forbes. https://www.forbes.com/sites/lorenthompson/2018/12/11/five-existential-

challenges-facing-elon-musks-spacex/?sh=19d50698127d

Muegge, S. (2019). Elon Musk and SpaceX: A Case Study of Entrepreneuring as Emancipation.

Technology Innovation Management Review. https://timreview.ca/article/1258

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