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1 Tesla Digital Strategy Oscar Lome Ratsaphangthong American Public University BUSN336: Strategic Policy Decision Making Steven Wynne 18 February 2024

2 Tesla Digital Strategy – Level 1 Header Have you ever wondered how fast the world has been advancing with technology? Many innovations created require renewable and non-renewable resources. Tesla, the electric vehicle manufacturer owned by Elon Musk, challenges the issue by developing electric vehicles powered by batteries, utilizing solar energy to sustain the environment from further pollution. Although the original business strategy is a great idea, Tesla has experienced issues with massive recalls of their vehicles due to their autopilot system (Siddiqui, 2023). Not to mention their CEO has a few controversies with his name because of his popularity and some decisions he has made (Renz & Vogel, 2020). By developing a new digital strategy to focus on improving AI technology and enhancing user interfaces, Tesla can clean their reputation and compete again in the electric vehicle industry market. Differential Strategy Tesla has a line of products that create a differential strategy of relevancy with their technology. This technology includes autonomous driving and its dashboard interface. In today's society, many electric vehicles provide a comfortable feel and feature autonomous driving characteristics such as full self-driving, parking assistance, lane-keeping assistance, etc. (McCauley, 2021) & (Makin, Arndt, & Beck, 2023). The main purpose of these autonomous driving features is to alleviate the driving experience of the user to provide a relaxing ride and all Tesla vehicles contain it. (McCauley, 2021). As for the dashboard interface, the technology enhances the driving experience by contributing a comfortable feel with its touchscreen and user- friendly terminal. The dashboard can allow the user to personalize their experience with access to general settings or entertainment services such as streaming and games (Karkaria, 2023). Tesla is no exception when it keeps up with the modernization of new technology to remain

3 relevant in the electric vehicle industry market and the race toward fully autonomous vehicles (Karamitsios, 2013). Porter’s Five Forces Model Utilizing Porter’s Five Forces Models, Tesla’s placement in the electric vehicle industry is well-known in the market and is one of the highest manufacturers compared to its competitors (Karkaria, 2023). Level of Competition When it comes to the level of competition in the industry, the rivalry is high for Tesla. Many companies such as Ford and General Motors are creating electric vehicles that are on the same level if not, better than the products of Tesla (Lugtu Jr, 2019). Ford has made their infamous F-150 truck fully electric labeled as the lightning model at a reasonable price starting at $49,995 (Leanse, n.d.) The F-150 lighting competes against Tesla’s Cybertuck starting at $57,390 which has seen some faculties already and even recalls from the National Traffic Safety Administration (NHTSA) (Silvestro, 2024). The issue displays Ford creating a more efficient vehicle at an affordable price point while Tesla is making a failed product for a higher cost. General Motors is also involved in the rivalry with the product of the Chevy Bolt to compete for the position of an electric subcompact SUV with Tesla (Lugtu Jr, 2019). Consumer Power The consumer power is high given many known car manufacturers produce electric vehicles. The challenge presented for the company is the delay in production times and long delivery orders given other electric vehicles are readily available at different dealerships (Lugtu Jr, 2019). Tesla’s leverage is the ability to purchase their products online and customization

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4 without the need for a dealership, but other companies can soon provide the option in the future for customers (Lugtu Jr, 2019) & (Karkaria, 2023). Supply Chain Power Resources and materials are critical elements for production companies. There is one common concern for manufacturing electric vehicles. The source of power for the vehicle is the battery. Tesla has diminished the issue by obtaining a gigafactory of batteries (Lugtu Jr, 2019). The gigafactory has enabled Tesla to lower expenses within its value chain. Tesla has also partnered with companies such as Daimler, Toyota, and SolarCity to acquire parts for their products in exchange for their batteries while SolarCity provides energy to the car charging stations (Lugtu Jr, 2019). The overall supply chain power for Tesla is low because the company incorporated its partners to increase its resources and materials. Threat of New Entrants The threat of new entrants into the electric vehicle industry is low due to the scarcity of resources and high costs of production of electric cars. Well-established companies can operate because of their existing technology and high buying power for materials (Rousseau, Ferres, Marcet, & Berrone, 2022). The average cost for a battery in the industry is around $14,200 (Lugtu Jr, 2019). Startup companies can only enter the industry if they have the wealth to compete to purchase the resources and partnerships. Available Substitutes The available substitution is high for electric cars. Gasoline vehicles can substitute identically with the same functions of transportation. The only difference between the two products is the source of power, which electric vehicles utilize a battery (Lugtu Jr, 2019). The main purpose of electric vehicles is to be environmentally friendly utilizing renewable energy

5 that does not cause pollution (Rousseau, Ferres, Marcet, & Berrone, 2022). This also creates the problem of Tesla competing with more businesses in the general industry of automobiles, not just electric vehicles. Innovation The improvement of AI technology and user interface has been significant in the electric vehicle market. Although Tesla has experienced some difficulties with the subject, the current technology utilized can be enhanced with architectural and routine innovation. In 2023, Tesla experienced a massive recall of over 2 million vehicles to fix their autopilot system. The issue has created a bad reputation name of the company (Siddiqui, 2023). If the company can invest more resources to repair its current tools with routine innovations, its reputation can be saved. For example, adding a predictive maintenance device that can collect information from the cameras and sensors used from the autopilot feature to determine areas that might require fixes before replacement (Makin, Arndt, & Beck, 2023). The tool could ultimately prevent accidents and save lives before the equipment is diminished. The user interface Tesla provides in its vehicles is significant, but the technology can be improved with architectural innovations. The first innovation user interface can add is creating priority tabs within its menu. The action can allow the user to quickly access its most commonly used tabs for better efficiency or personal preferences (Rousseau, Ferres, Marcet, & Berrone, 2022). In addition, the second innovation that can be implemented is tutorial resources. For instance, a tutorial can be provided in the user interface explaining how the autopilot system operates and a visual representation can be displayed. The feature lets the user learn about the multiple characteristics of the vehicle to gain a better understanding of system functions. (Teresa, Philipsen, & Ziefle, 2018).

6 Cultural Strategy Tesla employs the digital cultural strategy in the market with its modernization of AI and technology into its products. The current technology of society contains many characteristics of AI in new inventions and additional comfortability (Makin, Arndt, & Beck, 2023). The company is notable for its values of prioritizing creativity and boundary-pushing. Tesla utilizes AI technology to integrate self-driving and resource optimization for a smooth efficient trip (Lugtu Jr. 2019). Another key element is the vehicles’ touchscreen dashboards perform similarly to a smart device as they can modify display options, play games, and even play karaoke for the user (Rousseau, Ferres, Marcet, & Berrone, 2022). The aspect of the touchscreen dashboard is to push the boundaries and creativity of adding entertainment to electric automobiles. Tesla’s digital strategy revolves around innovation, pushing automotive boundaries, and integrating outside tools into their vehicles. Risk Management While the digital strategy of focusing on improving AI technology and enhancing user interfaces is great, there are also a few risks involved that may establish issues. The risks may include driver safety, increased labor, and software glitches. (Teresa, Phillipsen, & Ziefle, 2018). As autonomous driving technology further develops, there is a potential issue of drivers being too reliant on the features which can lead to accidents and loss of driving skills (Teresa, Philipsen, & Ziefle, 2018) & (Makin, Arndt, & Beck, 2023). This also creates the question, is it even worth implementing autopilot into vehicles if it will create bad drivers? The technology is meant to smooth the driving experience, not fully step off the wheel. A solution to mitigate this concern is to add a sensor on the wheel to monitor a hand signal when the autopilot is active. Another risk of increased labor can also create an issue, due to more work and resources needed

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7 to conduct further research into AI technology (Rice, 2022). Furthermore, the concern of software glitches is a potential issue since Tesla vehicles rely on software updates for further innovative features or fixes (Baron, 2023). An answer to the software bugs could be an on-call technician available twenty-four hours that provide aid for affected users. Conclusion In conclusion, Tesla’s new digital strategy aiming to enhance AI technology and user interfaces will aid its reputation to compete in the electric vehicle market. The differential strategy of relevancy the company provides with its AI and technology maintains the modernization of society within its products. Tesla’s placement in the electric vehicle industry is well known for its advancement, but the company must address the issues of safety before it can save its name. By investing more materials to innovate their current technology, Tesla can remodel their autopilot system and implement tutorial resources to prevent future misfortunes from occurring.

8 References Baron, E. (2023, February 17). Tesla Issues Software Update for self-driving problems. GovTech. https://www.govtech.com/fs/tesla-issues-software-update-for-self-driving- problems Karamitsios, A. (2013). Open innovation in EVs: A case study of Tesla Motors. Leanse, A. (n.d.). 2024 Ford F-150 lightning prices, reviews, and photos. MotorTrend. https://www.motortrend.com/cars/ford/f-150-lightning/ Lugtu Jr, R. C. (2019). Tesla: Testing a Business Model at its (R) Evolutionary Best (Doctoral dissertation, DE LA SALLE UNIVERSITY-MANILA). Karkaria, U. (2023). Newly Crowned Tesla crushes luxury market: American automaker proves it’s one to beat. Automotive News , 97(7073), 3. Makin, J., Arndt, F., & Beck, H. (2023, August 28). The impact of AI on automotive. Luxoft. February 11, 2024, https://www.luxoft.com/blog/ai-automotive Renz, F. M., & Vogel, J. U. (2020). ELON MUSK: LEADER OR LIABILITY?. Journal of Case Research and Inquiry , 6, 27. Rice, J. (2022). Adaptation of Porter’s Five Forces Model to Risk Management. Defense Acquisition Research Journal , 29(100), 126–139. https://doi.org/10.22594/dau.21- 890.29.02 Rousseau, H. E., Ferres, D., Marcet, F., & Berrone, P. (2022). Keeping Up with the Teslas: Technology Spillovers, Firm Capabilities, and Environmental Performance. Academy of Management Annual Meeting Proceedings , 2022(1). https://doi.org/10.5465/AMBPP.2022.14859abstract

9 Siddiqui, F.(2023). Tesla recalls 2 million cars with “insufficient” Autopilot safety controls. The Washington Post , NA-NA. Silvestro, B. (2024, February 2). The Tesla Cybertruck has already been hit with a dumb recall. Motor1.com. https://www.motor1.com/news/707180/tesla-recalls-cybertruck-for- warning-lights/ Teresa, B., Philipsen, R., & Ziefle, M. (2018). sCARy! Risk Perceptions in Autonomous Driving: The Influence of Experience on Perceived Benefits and Barriers: sCARy! Risk Perceptions in Autonomous Driving. Risk Analysis , 39, 342–357. https://doi.org/10.1111/risa.13190 United States Department of Transportation. (n.d.). Automated vehicles for safety. NHTSA. https://www.nhtsa.gov/vehicle-safety/automated-vehicles-safety

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