key: cord-0059122-4asctfn5
authors: Konina, Natalia
title: Introduction: At the Dawn of the Fourth Industrial Revolution—Problems and Prospects
date: 2021-01-03
journal: Digital Strategies in a Global Market
DOI: 10.1007/978-3-030-58267-8_1
sha: fe4727dfea564b918bab5d15d180269ebb23b3fb
doc_id: 59122
cord_uid: 4asctfn5

The Fourth Industrial Revolution is characterized by the speed, scale, and changing role of machines and technologies in various aspects of business, exposing threats to existing companies, forcing modernization of business models and firms’ strategies and structures. The authors of the book made an attempt to investigate through different lenses the factors and dynamic process of digital strategy elaboration and implementation by international companies of different industries or sectors or country point of view in the framework of the Fourth Industrial Revolution. Part of contributions revisit from a theoretical and/or empirical standpoint, the main theories in the field, taking into consideration macro aspects connected with the Fourth Industrial Revolution and crucial digital technologies implementation, ranging from new concept of marketing in digital era and institutional aspects of digital transformation to the concrete tools of machine learning and digital transformation of the corporate governance. The second part of the volume focuses on the firms of concrete sectors or industries and is dedicated to a number of empirical studies on digital strategies implementation in real activities of the companies from different industries and on different markets.

The merging of cyber-physical technologies within the Fourth Industrial Revolution is characterized by the speed, scale, and systemic nature of socio-economic consequences. The most important technologies already being implemented in the Fourth Industrial Revolution include the Internet of Things (IoT); artificial intelligence; sensors, collecting and evaluating Big Data in real-time; Big Data and analytics; robots with greater autonomy and flexibility; autonomous vehicles; 3D printing; virtual and augmented reality; cloud computing; online platforms; software as a service; quantum computers; smart materials; blockchain; and a number of other technologies. The Fourth Industrial Revolution is changing the economic landscape and boundaries of industries and transforming the traditional business environment, creating new markets while destroying existing businesses; these developments make it possible to understand how companies create value, manage changes, and lay the basic principles for creating and implementing strategies. Fundamentally, this era is changing traditional approaches to fundamental issues-how to reach customers, how to compete and guarantee growth and sales (Baldwin 2016) .

It should be noted that the speed of technological changes and innovations has been increasing significantly since 2015. The development of new technologies of the Fourth Industrial Revolution is now becoming exponential, which has an increasingly diverse and complex effect on reducing transaction costs, production processes, and creating and transforming materials and goods (Deloitte 2015) .

Some new technologies will significantly improve transport logistics, as well as coordination between exporters and importers, which will increase trade in goods, services, and digital data (Lopez Gonzalez and Ferencz 2018) . According to studies, cross-border B2C e-commerce-but for the coronavirus infection pandemic-could grow to about $1 trillion by 2020. Logistics technology continues to improve significantly. The Internet of Things (IoT) allows delivery services to become more efficient by tracking packages in real-time, while AI autonomously directs vehicles taking traffic into account. Automatic processing of documents significantly speeds up customs processing; for example, at ports, autonomous vehicles can unload, store, and reload containers faster and with fewer errors. Amazon warehouses around the world use about 100 thousand robots, whose productivity is about 4-5 times higher than that of humans, although the skills of the existing robots are still too limited to make warehouses fully automated. Blockchain delivery solutions can reduce transit time and speed up payments. New logistics technologies can reduce delivery and customs clearance times by 16-28%.

Innovative technologies of the next technological mode are increasingly used by TNCs with global value chains around the world, in particular, the German Trumpf (producing laser equipment), the German Siemens (the Internet of Things and medical engineering), the Swiss ABB and the American Amazon (creating robots), the British Rolls-Royce and the American General Electric (creating jet engines), and the American Tesla and the German Daimler, BMW, Volkswagen (dealing with electric vehicles).

An example of implementing the principles of the Fourth Industrial Revolution in practice is Siemens, the largest German TNC (Konina 2018) . Siemens sees digitalization as a comprehensive task to increase efficiency: across the entire conglomerate, all internal processes are transferred to digital platforms; digital tools, systems, programmes are introduced; and end-to-end digital value-added chains are built. Siemens makes extensive use of digital twin technology, which means digital twins can be created before physical prototypes; this reduces the time it takes for the product to enter the market, and can significantly improve product quality, while reducing the cost of making efforts to eliminate errors and deviations before the product leaves the production site. As a leader in the Internet of Things (IoT), Siemens is widely developing open innovation through an internal venture capital fund system, and is using partnerships with Alibaba Cloud (a subsidiary of a Chinese digital conglomerate) to promote MindSphere, a digital platform for the Internet of Things.

The transition to the emerging new industrial production system is mainly being influenced by digital technologies. The increasing affordability and reduced prices of ICT products, their wide horizontal distribution, and the internalized interaction of several digital approaches is leading to the emergence of new technologies and ways to use them. The Fourth Industrial Revolution opens doors for business models that take advantage of mass customization, where each product is created as a unique single product (McKinsey 2019).

The integration of digital technologies and other new developments is creating profound changes in almost all industries, creating threats for existing companies and forcing them to modernize business models. Breakthrough technologies and digital innovations stimulate consumer income and demand, and reduce costs, creating areas for inventing new values based on open innovation. Digital globalization and Industry 4.0 key technologies-such as new mobility, artificial intelligence, AR/VR, 3D, cloud computing, business analytics, and social networks-are transforming the global market; they provide great opportunities yet at the same time create serious challenges and unexpected market risks. Many companies from developed countries have faced competition from aggressive high-tech firms from developing countries. The modern economy is characterized by a combination of competition and cooperation, rapid change of priorities, open innovation and the use of cluster opportunities, and the transition to a network-based decentralized management model based on trust and cooperation. The challenges and opportunities in manufacturing, procurement, sales, marketing, and logistics are associated with new ways of creating value.

Digitalization of the economy (digitalization)-the widespread use of ICT, digital platforms, and other digital technologies, alongside their integration into the business processes of companies in a growing number of sectors-is making economic systems more complicated; they are transformed into dynamic network systems both at the micro and macro levels. Digitalization has provoked the active use of new information tools, such as cloud computing or Big Data analytics, which are already contributing significantly to GDP (OECD 2017).

The use of data has also transformed manufacturing, fostering a new production revolution (OECD 2016). The widespread use of information has already changed the entire production system. Cross-border data exchange in 2014 was 45 times greater than in 2005, which means a contribution of approximately $2.8 trillion per year to global economic activity, or 3.5% of global GDP (OECD 2017). Moreover, according to the 2014-2022 forecast, the cross-border data exchange may grow another 9 times.

Platform business has become the new ecosystem of the global digital economy. Online platforms are actively developing and capturing an increasing share of promising markets, which affects the markets, consumers, the company's competitive position, the technologies used in production, and marketing. In 2017, the total value of platform-based US companies with a market capitalization of more than $100 million exceeded an estimated $7 trillion, which is 67% more than in 2015 (UNCTAD 2019).

Some global digital platforms have gained very strong market positions in particular segments. For example, about a 90% share of search engines belongs to Google, which is part of the digital conglomerate Alphabet.

Facebook accounts for 66% of the global social media market, making its platform the most popular social network in more than 90% of countries. In China, the WeChat communication network (owned by Tencent) has more than a billion active users, and its payment system, along with Alipay (owned by Alibaba), covers almost the entire Chinese mobile payments market. At the same time, Alibaba accounts for an estimated 60% of the Chinese e-commerce market (UNCTAD 2019).

The digital revolution is having a profound impact on the structure, dynamics, and direction of the global market's evolution. More and more, society is dealing with a single global market for the vast majority of goods and services, rather than with a combination of national economies, or with markets limited by regional economic groupings. Nonetheless, the global market is increasingly acquiring a different dimension, as digital streams are becoming increasingly important. Over the past two decades, the global export of ICT services, now made possible using digital technology, has increased much faster than the entire export of services in general, which indicates the growing digitalization of the global economy. In 2018, the volume of exports of services provided using digital technologies reached $2.9 trillion accounting for 50% of global service exports (UNCTAD 2019).

The digital realities of the Fourth Industrial Revolution contribute to how companies are evolving from hierarchical to network structures. Many industries have faced competition from companies that have implemented breakthrough technologies, including those working in the digital sphere (digital disruption) (Skog and Wimelius 2018) . Breakthrough innovations completely change the way an industry or market operates, and the state of competition offers customers a network effect or lower cost or other economic benefits, including a unique consumer experience (Christensen et al. 2018) . The strongest digital disruptors-like Amazon, Google, Uber, and others-employ combinatorial disruption, creating different values which are mutually reinforcing such as cost value, experience, and platform values (Stonehouse and Konina 2020) . The Fourth Industrial Revolution requires companies to become more flexible, approaching a new form of network organizational structure: an edge-based organization. Under this organizational structure, executives and their teams are empowered at the edge of the company, with the freedom to undertake the fast moves necessary for customer satisfaction and new value creation. These edge-based companies are characterized by an innovative organizational culture, cooperative spirit, widely distribute decision-making, and quick reactions to evolving realities in the market (Leodolter 2017) .

Among the best examples of building new business opportunities, based on new technologies as the primary revenue driver and facilitator of new business models, are social networks and location awareness. Social media now has a very big impact on business, totally changing approaches to advertising, building brand awareness, and customer loyalty (Appel et al. 2020 ). According to 2019 social media statistics, there are now 3.2 billion users around the globe, or about 42% of the total population at present. Facebook now has over 650 million users, with 68% of adults based in the US reportedly having a Facebook account. Active social media users increase with every passing generation: 48.2% Baby Boomers, 77.5% Generation X, and 90.4% Millennials have social media accounts. Twitter's volume of visitors is rising at over 80% a year. Social media has a very big impact on business: 73% of online marketers agree that their efforts in implementing a social media marketing strategy for their business have been effective.

According to the authors of this book, the literature on international business has paid little attention to how international companies have implemented digital strategies in the framework of the Fourth Industrial Revolution; the factors and dynamic processes of digital strategy elaboration have been under-represented in such writings. Naturally, international operations impose their complexities on management in the New Digital Era, which can be characterized through additional moderating, intervening, or competitive and strategic factors, with a profound influence on performance abroad. In this book, we want to address the impact of new digital technologies on strategies of international companies, and how these companies will be managed in the future.

Therefore, this volume's overall aim is to shed fresh light on a range of concepts, influential factors, and strategic decisions facing international firms in the situation of the Fourth Industrial Revolution, examining them in their own respective environmental, institutional, and operating conditions and contexts, following some theoretical developments in each of the two parts of the volume.

The broad objective of this volume is to examine a young, but rapidly evolving, field of scholarly inquiry: the impacts of the changing environment of the Fourth Industrial Revolution internally, with a specific focus on a list of selected issues in the digital strategy, management and marketing domain. For all the reasons above, we chose to focus this volume on the fundamental topic of how new emerging technologies influence international firms; their business strategies, elaboration thereof, its implementation, and their intersection and combination with different aspects of economic development at both a macro and a micro level.

This book this volume aim to study not only issues arising but their potential impacts; Part I will look at digital issues concerning firms, institutions, and policymakers from macro or subject lenses, whilst the impact of technologies of the Fourth Industrial Revolution on firms from industry or sector or country viewpoints will be the focus of Part II.

At the beginning of this volume nine-part study of contributions revisit, from a theoretical and/or empirical standpoint, the main theories in the field. These take into consideration macro aspects connected with the Fourth Industrial Revolution, as well as crucial digital technology implementation, ranging from the new concept of marketing in the digital era and institutional aspects of digital transformation to the concrete tools of machine learning and the digital transformation of corporate governance.

Following this introduction, after a review of the institutional framework of digital strategy and digital marketing operations, the discussion turns to the issues in business environments connected with European digital policy and global value chains . This discussion further expands the examination of such subjects as sourcing, networking, advance management, and concrete digital tools connected with data mining and machine learning in digital marketing. A combination of these subjects helps to focus impact strategies, which guides a firm's adaptation of its digital strategy, and paves the path for the firm's overall inclusion in the practicalities of transforming post-industrial economy.

Further Chapters of the volume focus on the specific organizational forms and actions, behaviours and orientations thereof that influence the performance of firms or industries in international markets; these articles are dedicated to several empirical studies on the most pressing contemporary issues in the area of digital strategies implementation in the real activities of companies from different industries on different markets.

Against this backdrop, the volume explores the theoretical and empirical challenges related to concepts of the post-industrial society: digitalization, firm management, organization, marketing, business models, networking, and operations in global markets. The contributors try to reflect upon pressing issues in the field of international business, and question how current management methods and existing business models can be adapted to fit the challenges of ongoing digital transformation.

The authors investigate the business trends most likely to impact the operations of firms in the field of modern marketing, as well as the management of such firms of different sectors; the authors try to identify proper suitable managerial solutions for the challenges and opportunities created by the turbulent and fast-evolving environment of the Fourth Industrial Revolution. A secondary focus is on the methodological challenges for this research field, such as the difficulties in selecting proper goals and performance indicators, and measuring them consistently. Thirdly, the authors want to share their views and research approaches with the wide English-speaking international auditorium.

The contributions cover the most important domains connected with the firm, industry, and country levels for Digital Strategy elaboration, and their further execution in the turbulent global market. The goal of the authors is to gather fresh theoretical analyses and empirical studies, based on the combined research of technological, social, and economic trends, in the pages of a unitary volume, to serve scholars in the field, policymakers, and the public.

Following the introduction, Chapter 2 by Valentina Gerasimenko, is entitled "Digital Marketing Strategy: New Performance and Risks". The author interviewed top managers of different companies operating in Russian markets about digital marketing strategies, tools for implementation, and emerging risks of being resistant to change.

Chapter 3 by Olga Butorina focuses on the external influence of the EU's digital policy through economic lenses. Analysis of the most important political materials of 2015-2020 showed that if the EU's digital policy was initially aimed at overcoming internal barriers, today it is aimed at creating a favourable global digital environment, facilitating the efforts of the EU to become the global regulator.

The following four chapters have a rather specific focus, each narrowing the discussion down to specific institutional macroeconomic issues of digital strategies at the dawn of the Fourth Industrial Revolution.

The author of Chapter 4, Vladimir Osipov, contributes to the discussion of different approaches to the embeddedness of the Fourth Industrial Revolution in national economics and on the global market, which he argues consists of two main paradigms of institutional policy. The author concludes that Natural States pursue a top-down policy to embed institutions of the Fourth Industrial Revolution, but Open Access Order goes radically the other way, implementing a "down-top" path. The digitalization of national economy occurs according to the chosen institutional policy.

The authors of Chapter 5, "Genesis of Network Management Forms During the Fourth Industry Revolution", Tatiana Skryl and Marina Gregorić explore the theoretical and empirical challenges around the concept of network effects on product team operations, in the cluster and the nature of networking among companies in the Fourth Industrial Revolution.

On the topic of a strategic approach, the co-authors of Chapter 6, Alina Ignatieva and Pavel Trifonov, take a look at perspectives on value chains, including the features and possibilities of Russia's involvement in the global value chains in the era of the Fourth Industrial Revolution.

Dmitry Stapran and Igor Stepnov are the authors of Chapter 7, "Sourcing and Digital Strategy Performance of Big Companies in Key Global Markets". This chapter contributes to the discussion of the fundamental concept of sourcing by Russian firms during four different periods in the digital era, based on transaction costs, competitive advantage, trust, and institutional voids.

The author of Chapter 8 "Technologies of the Fourth Industrial Revolution as a Driver of Advancing in Digital Operations Management" Julia Kovalchuk investigates the trends most likely to impact the opportunities and prospects for the development of operational management in the context of the economy's digital transformation.

On the topic of how boards of directors are evolving their activities in digital times, Alexander Yukhno take a look at the different perspectives on the increasing role digital characteristics play in firm's business strategy in Chapter 9 "The Fourth Industrial Revolution and the New Paradigm of Corporate Governance". The author concludes that digital strategy and digital tools significantly expand management capabilities, and the role of the board of directors as a strategic management and oversight body will continue to increase.

Chapter 10 "Application of Data Mining and Machine Learning Methods to Enhance the Effectiveness of Digital Marketing Strategies" written by Sergey Gutnik is devoted to the ways in which data mining and machine learning methods enhance the effectiveness of digital marketing strategies. The author focuses on machine learning algorithms (regression, classification, clustering, decision trees, neural networks) and particularities of their implementation, as well as on the benefits of machine learning in marketing strategies.

In their entirety, these chapters give answers to-as well as ask additional questions about-the aspects of business environments influencing the elaboration and implementation of digital strategies in the global economy. Furthermore, these chapters provide a framework for the further discussion of the impact of digital technology on the activities of modern companies. The chapters have a focus on industry or national specificity. The range of companies and industries under consideration is wide-from digital conglomerates and the digital transformation of oil and gas company management, to the digital characteristics of Western companies' marketing strategies in the Chinese cosmetics market, as well as the impact of digital technologies on value management in Russian companies.

Chapter 11, entitled "The Evolution of Conglomerates in Digital Era: Strategies and Performance", is co-authored by Natalia Konina, Irina Vladimirova and George H. Stonehouse. This chapter offers a comprehensive review of the characteristics of the activities and strategies of digital conglomerates. The authors prove that conglomerates, as a form of integrated business organization in global markets, have not exhausted themselves, but the current stage of the digital revolution has created the prerequisites for the transformation of digital leaders into global digital conglomerates, which, using the network nature of operations and platform features, have managed to increase the efficiency of their operations.

Chapter 12, entitled "Digital Transformation Strategies of Global Oil and Gas Companies: Preparing for the Fourth Industrial Revolution", written by Anastasia Sheveleva, Peter Khaiter, and Sergey Tyaglov, turns to the implementation of digital tools in the management of the biggest oil companies. This chapter discusses the impact of digitalization on the planning, organization, coordination, management, and control processes in oil and gas companies-their main functions of management-as well as identifying the benefits of the use of digital technology in management activities. The research proves that digitalization, despite the debatable nature of the problem, as a whole has a positive impact on the management of oil and gas companies, increasing its effectiveness.

Chapter 13 in the volume, co-authored by Yuriy Savinov, Evgeniya Taranovskaya and Oleg Gavryushin, focuses on the development of ecommerce as a new form of internalizing company activities, facilitating the minimization of expenses for advertising and marketing connected with market entry. The authors note that despite the domination of the most used method of calculating the Return on Investment (ROI), other methods should be applied: in particular, those based on accounting.

Chapter 14, co-authored by Lilia Revenko and Nikolay Revenko, concentrates on the effect of digital platforms on new strategies in the agribusiness sector. The authors suggest that the adaptive process to the platform-based economy depends on several aspects: geographical location and profile, organizational structure, the propensity for innovation, the market environment, and government regulation factors. The article draws attention to the ambiguous influence digital platforms have on articultural business; for example, high-technology companies' improvement in performance is accompanied by the digital divide.

The author of the next Chapter 15 "Retail Business Models in the Era of the Fourth Industrial Revolution" Ekaterina Bostoganashvili identifies both the challenges and the opportunities for the evolution of international big retail firms in these turbulent times.

The next Chapter 16, written by Raisa Nozdreva and Anna Churakova, reviews the practical use of modern digital tools by hospitality companies, and concludes that they are the most important vehicles for the implementation of their empirical marketing strategies. The chapter describes the results of a system analysis of using digital tools by hotel chains, identifies the key digital channels being used to interact with the consumer, and determines the extent of integration among the various channels, as well as the possibility of creating an integrated cross-channel infrastructure.

The authors of Chapter 17 Elena Ponomareva and Elena Nozdrenko focus on the digital transformation of Western companies' marketing strategies in the Chinese cosmetic market. Cosmetic goods marketing is aimed at the millennial generation, which is the predominant target audience, and this marketing requires digitalization in the tools and methods of its communication and distribution. The chapter notes that digital strategies in the cosmetic market in China are a key driver of marketing, as they allow flexibility in responding to ongoing changes and market needs.

Chapter 18 "Management by Values in Digital Transformation Strategies of Russian Companies and the Fourth Industrial Revolution", co-authored by Alexander Gaponenko, Anastasia Erokhina, and Maria Pokrovskaya, is dedicated to an empirical study of the impact of management by values on the digital business transformation processes of Russian companies.

Chapter 19, Conclusion.

The Future of Social Media in Marketing

The Great Convergence: Information Technology and the New Globalization

Disruptive Innovation: An Intellectual History and Directions for Future Research

Industry 4.0: Challenges and Solutions for the Digital Transformation and Use of Exponential Technologies

Evolution of the Largest Multinational German Companies

Digital Transformation Shaping the Subconscious Minds of Organizations: Innovative Organizations and Hybrid Intelligences

Digital Trade and Market Openness (OECD Trade Policy Tapers

Globalization in Transition: The Future of Trade and Value Chains

An OECD Horizon Scan of Megatrends and Technology Trends in the Context of Future Research Policy

The Next Production Revolution: Implications for Governments and Business

Digital Disruption

Management Challenges in the Age of Digital Disruption