Read the Mini Case Study Below and Answer the Following

question 98

Essay

Read the mini case study below and answer the following questions:
a) Comment on Virgin Galactic's current approach to pricing.
b) How do you think VG's approach to pricing is likely to change as the space tourism market matures?
Mini- Case: Virgin Galactic and Space Tourism
The race to develop commercial flights into outer space is well and truly on with several companies having reached the prototype stage. Virgin Galactic (VG) is widely regarded as the pioneer and market leader, is currently running test flights and expects to offer the first commercial services around 2014. Although the costs of developing this technology have never been disclosed, the investment in sub- orbital space travel is expected to run into many billions of dollars. Market players will no doubt want to recoup this investment as quickly as possible by charging the right prices. VG will be offering space flights of about two hours duration for $200,000 per person and has already attracted deposits from more than 600 eager customers. Hot on VG's heels are several potential competitors-Space Adventures intends to commercialise in around 2016 and has announced a price of $110,000; XCOR currently quote a fare of $95,000 per person while Armadillo quote $102,000 but neither of the latter two companies have offered firm dates for commercial service availability which suggests that they are 5-10 years away from launch. Analysts who have studied the space tourism market suggest that as the industry matures, prices are likely to drop as low as $20,000 per fare.

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Definitions:

Cost of Living

Refers to the amount of money needed to cover basic expenses such as housing, food, taxes, and healthcare in a certain place and time.

Poverty Threshold

The minimum level of income deemed adequate in a particular country, determining who is classified as poor.

Poverty Rate

The percentage of the population with incomes below the poverty threshold.

Poverty Threshold

The minimum level of income deemed necessary to achieve an adequate standard of living in a given country.