Research on Economic Theory Under the Operation of Business Model 4.0

Abstract

With the emergence of intelligent technology for cyber-physical systems (CPS), manufacturers’ production has come to the age of Industry 4.0, and the corresponding Business Model 4.0 has been born. Under Business Model 4.0, can consumers and producers obtain instant, sufficient, and transparent product or service information through the Internet in mutually beneficial behaviors? This article examines the economic system under the operation of Business Model 4.0 from the perspective of relevant theories of economics and attempt to analyze the theoretical mechanism of the operation of Business Model 4.0. It is found in the article that under the process of Business Model 4.0, it should be possible to quickly and easily achieve the conditions of Pareto efficient allocation in the economic theory. However, everyone involved in the Internet has to behave in favor of others in this Business Model 4.0. If this factor is lacking, the efficiency of the economic system may disappear.

Keywords

Business Model 4.0 Efficiency Industry 4.0 Internetwork

Introduction

With the rapid changes, the industry’s technological transformation has also experienced the Industrial “1.0” mechanization era. At that time, the invention and application of steam engine technology produced a new method of large-scale mechanized production, eliminating traditional handicraft workshops, and ushering in the Industrial “2.0” era. In the era of electrification, the invention and application of electricity brought about a new method of electric-driven mass production. They eliminated the production methods that relied on old energy. Then the industry entered the era of Industrial “3.0” automation. The new automated production methods in the manufacturing industry have eliminated the previous production methods dominated by manual labor. Every industrial era upgrade has been guided by technological change.

In the Fourth Industrial Revolution, economies of scale broke down boundaries to reach new levels. Interactions between people and work are becoming more diverse and reliant on network-related technologies (Tan & Rajah, 2019). We call the digitalization of the current industry into production “Industry 4.0.” This aspect of production is the emergence of intelligent technology based on the Cyber-Physical System (CPS). This production technology will promote the upgrade of the industrial version to the “Industry 4.0” era of intelligence, bringing new production methods to the economic system and replacing the past production methods. Therefore, the arrival of “Industry 4.0” is bound to significantly impact the traditional business model, making it inevitable that today’s business model will also change.

Several studies have examined multi-stakeholder interests and expectations when attempting to implement circular economy initiatives from an organizational perspective. The transformation of a circular economy in Industry 4.0 requires a better understanding of government, suppliers, international organizational interests, and expectations for IoT (Internet of Things) (Awan et al., 2021). In today’s advanced commercial and industrial era, the importance of the health-care supply chain during the COVID-19 pandemic is evident in the forecasting estimates. The ongoing health-care supply chain is significant to minimize COVID-19 cases. The results concluded that sub-Saharan African countries need to make more efforts to curb coronavirus cases by efficiently increasing their health-care logistics supply chains (Sriyanto et al., 2022). Some scholars were exploring the combination of emerging technologies in Industry 4.0 with circular economy practices to establish a business model for reusing and recycling waste materials such as scrap metal or e-waste. They found that it had a positive impact on improving business sustainability by reinserting waste into the supply chain to manufacture products on demand (Nascimento et al., 2019).

The business model concept existed as early as the 1950s. It was not until the 1990s that it began to disseminate and apply widely; there is no consensus for us on the definition of the business model so far. The mainstream view is that the business model refers to how companies provide products and services to consumers in a specific value chain and value network. In this process, consumers can be satisfied, and the business can make profits. Morris et al. (2005) found that the business model has been highly valued in the practice of business entrepreneurship, but we currently have limited attention. Therefore, we have no consensus on the business model’s definition, nature, structure, and evolution. We are trying to find theoretical foundations for corporate business models.

Z.-Y. Li (2007) pointed out that the purpose of the business model is to maximize customer value, integrate various internal and external elements of enterprise operation, and meet all consumers’ needs. It was to achieve the expected value of all consumers while enabling the enterprise to achieve sustained profitability. In terms of the various elements and related relationship concepts covered by the business model, Mao (2012) proposed that the business model illustrated a particular entity’s business logic process. The model was what value the company can provide for customers, the company’s internal structure, partner network, relationship capital, etc., and can realize the entire process of creating, promoting, and delivering these values. In the process of this model, the company can generate sustainable profits.

Gassmann et al. (2014) stressed the importance of innovative business models in today’s constantly changing world and defined a unified theoretical basis for business models. By studying the most revolutionary business model innovation cases in the past 50 years, they have determined that predictable and systematic models are the core of business model innovation. And unexpectedly, they found that more than 90% of business model innovations restructured the existing ideas and concepts in other related industries. In 2014, people triggered the fourth industrial revolution, and the German Industry 4.0 platform makes a more comprehensive explanation of the concept of Industry 4.0 (MacDougall, 2014). In Industry 4.0, all relevant entities involved in value creation will form a network. Each participant can obtain data from the network platform at any time and create the most prominent value stream to achieve the real-time sharing of all relevant information (Schlechtendahl et al., 2015).

Some scholars have proposed that the digital transformation in the Industry 4.0 era will inevitably need corresponding innovations in business models (Y. Chen, 2016). The industrial companies of Business Model 4.0 should start from an innovation perspective, which should link Servitization and Industry 4.0 concepts. Two recent trends transforming industrial companies are identified as Servitization and Industry 4.0. Servicization is primarily focused on adding value to customers (demand-pull), whereas Industry 4.0 is typically associated with adding value to manufacturing processes (technology-push). Product companies can innovate their business models through the Digital Transformation journey, and benefit from Servitization and industry 4.0. Therefore, how to combine service offerings and digital technology (digital level) is a crucial issue for the success of enterprises in industry 4.0 (Frank et al., 2019). There are many challenges for developing scalable and sustainable impacts in a circular economy business model (CEBM). In industrial 4.0, the framework of economic system highlights the interplay of the CEBM, innovation success factors, and obstacles on a micro-level. Success factors for the sustainable transition of a circular economy business are primarily derived from personal selling techniques of recycled products, and management expertise (Awan & Sroufe, 2022). Business models based on the IoT can make economic activities more effective in an open economic system. In particular, the popularized use of the third-payment of the IoT model will lead to the increase of national income and the prosperity of the economy. However, third-party payments will have ambiguous effects on such an economy’s domestic interest rates and foreign-exchange rates (C. Chen, 2020).

Enterprises’ Industry 4.0 strategic plan requires implementing specific and innovative business models. In Industry 4.0, people can subvert the conditions of value creation and profit model in the traditional business field through the links of people, things, and systems (Bai, 2015). Therefore, when the Industry 4.0 wave rises, the corresponding innovative business model; that is, the Business Model 4.0 is bound to emerge accordingly. Guo (2016) believed that the basic structure of the business model should cover four dimensions. The first dimension is the value proposition, which explains what kind of products the company can provide to customers or the value that the customers believe to exist. The second dimension is the profit model, which explains how the company obtains income, distributes costs, and earns reasonable profits. The third dimension is the critical resources, which refer to the most vital factor necessary to maintain the effective operation of the company’s business model. These resources enable the company to create and provide a value proposition. The fourth dimension is the crucial processes; these processes are the basis for the company to obtain critical resources, establish customer relationships, and achieve profitability. Although there are no commonly accepted definitions for either the business model or its building blocks, academics and practitioners concede that a business model is all about value (Peric et al., 2017).

Conceptually, the complexity of business models hinders the development of theoretical research. However, understanding the challenges and business model cases in today’s market is critical to improving performance of firms (Fjeldstad & Snow, 2018; Snihur & Tarzijan, 2018). In the book “Business Model 4.0,”Liang (2018) proposed that each link in the industry chain of Business Model 4.0 is no longer a one-way relationship but a networked cooperation model linked through the Internet. This model is called Business Model 4.0. The concept of Business Model 4.0 covers five core keywords; link, value, experience, sharing, and win-win. Therefore, in Business Model 4.0, various elements in commodity activities will flow continuously to promote the interaction and integration between departments, enterprises, and even industries. This model will break the boundaries between producers, sellers, and consumers.

Z. Wang et al. (2020) considered that firms had transformed their business models during the contemporary changing environment by integrating advanced digital technologies in which their capabilities contribute critically. They pointed out that the companies must focus on the capabilities of IT to make the digital business strategies effective in improving the firms’ performance. The business model innovation (BMI) may improve the current delivery system by creating a new offering system, accelerate the growth of firms, and help in promoting the sustainability of the economy (R. Wang & Chebo, 2021). The enterprise architecture (EA) offers integrated business processes with activities and information, which can be generated by adopting customized information systems to meet social needs. EA also can support management executes and controlling activities related to business processes through interaction and alignment with the information system (Correia et al., 2021).

We can see from the above that industry technological change has come to the age of Industry 4.0, and the corresponding Business Model 4.0 has been born. The aim of conducting commercial activities is to create value, and the reason why consumers buy products is to obtain their value. Thus, if a business wants to sell its products successfully, it must know what its consumers truly need. In this new era, the value of products has already been redefined. People tend to buy products to meet their actual needs and have consumption experiences. Of the two the latter has become the core value of products. To provide consumers with more experiences when consuming products and services, a business needs to open its production and sales and work with enterprises across different industries. This will enable it to create more value for its potential consumers. In this process, the elements involved in the commercial activities circulate endlessly, promoting the interaction and integration among different departments, enterprises, and even industries. The boundaries between producers, sellers, and consumers are also broken. Each link in the industrial chain is no longer a one-way connection, but a mode based on network cooperation connected through the Internet. Thus, it is not uncommon to see the use of communication technologies and data analysis methods such as the Internet, the Internet of Things, and wireless communications in today’s commercial activities. A business model that digitizes, internetizes, and intelligentizes business processes, channels, marketing, and operations is borne accordingly. Some people call it Digital Commerce or call this model as Business Model 4.0.

However, in terms of research perspectives on Business Model 4.0, most focus more on the innovation and transformation of the business model structure and focus less on the economic theory exploration under the operation of Business Model 4.0. Even this aspect of research is still lacking. In other words, most of the research contents in this regard tend to the actual business operation model of industries, enterprises, and consumers, and offer less analysis on the theoretical mechanism under the process of Business Model 4.0 from the theoretical perspective of economics. For this reason, this paper will attempt to examine the social system under the operation of Business Model 4.0 from the theoretical perspective of relevant economics and the hope to obtain the economic effects of the social system under Business Model 4.0.

Description of Business Model 4.0

It is accepted that “Industry 4.0” is a network with cyber-physical systems as the core. It connects physical devices to the Internet, enabling physical devices to have five functions: computing, communication, precise control, remote coordination, and autonomy. It combines the virtual world and the physical world. Based on CPS, all elements in the production system such as people, objects, information, and resources can be closely linked, creating a brand-new intelligent IoT network and transforming the original production factory into an intellectual environment.

We all understand that people had limited access to information in the past, and consumers and producers have been in a state of information asymmetry for a long time. It is difficult for consumers to easily communicate their actual needs to producers and quickly. Based on cost considerations, producers also choose not to disclose production information and privately standardize large-scale production to maximize their interests. But with the evolution of the times, the Internet has now connected consumers with producers and consumers with consumers. This connection allows consumers to participate in the development and production of products and directly affects the sales and production of products through their comments and sharing of products. Therefore, the connotations of producers and sellers have been changed in the Internet era. Consumers are those who buy products and those who produce and sell products.

Undoubtedly, the evolution of networks in today’s world not only connects enterprises and consumers, but also connects all aspects of business operations such as enterprises and enterprises, industries and industries, etc. Many enterprises have begun to develop their business scope and expand their cooperation with other enterprises through networking platforms, making the trend of industry integration more obvious. Therefore, the Internet has created a virtual business operation space. This virtual space directly connects with the business operation in the real world and can even affect the business operation in the real world. This virtual space will also become a new world for enterprise development. Business Model 4.0 was born in this context; it has emerged, and our lives are integrated constantly into it.

Co-opetition, a term combining the words “competition” and “co-operation,” implies the arrangement between competing firms to cooperate on specific projects or in certain areas of business for mutual benefit, even while generally remaining competitors. The term was first coined in the early 1990s by Noorda, R. J., the founder of Novell Corp., and gradually achieved eminence, especially in the dot-com economy. Later, Brandenburger and Nalebuff (1996) proposed a complete concept of cooperation-competition in the book “Co-opetition.” They believe businesses can become more competitive by cooperating, hence the neologism “co-opetition.” Creating value is a process of cooperation, and capturing value naturally requires competition. This process cannot be fought alone. Enterprises need to work closely with customers, suppliers, employees, and related personnel. The book also explains that “competition and cooperation strategy” mainly refers to the strategy of an enterprise to cooperate with different types of enterprises or stakeholders to establish a competitive advantage for the enterprise. Its purpose is to achieve a “win-win” for both parties through cooperation in competition and competition in cooperation. In today’s commercial society, when some companies are still busy with fierce competition, some companies have begun to try to cooperate and share, and these companies that adopt the “competition and cooperation strategy” have achieved results and have also spread in the business field.

Ibarra et al. (2018) proposed relevant knowledge of how Industry 4.0 affects business models and identified the resulting innovations. They have identified a series of characteristics, problems, and requirements to bring the company’s business model closer to the era of Industry 4.0, such as service orientation, network ecosystem, and customer orientation. In addition, they described the impact on value creation, delivery, and acquisition after the reconfiguration of the business model due to the adoption of Industry 4.0. They also proposed four innovative methods based on business models with different levels of innovation to meet the digital era. These ways were from optimizing internal and external processes or improving customer relationships, disruptive business models, creating new value networks, or intelligent products and services to achieve “Business Model Innovation.”

The industrial model has evolved from 1.0 to 4.0, and the corresponding business model has also evolved from 1.0 to 4.0. From Business Model 1.0, 2.0, 3.0, and 4.0., how is it different? This article can be briefly described as follows;

(1) Business Model 1.0: The production and sales integration model, the so-called production and sales integration model, refers to traditional enterprises’ process from production to sales based on product sales.

(2) Business Model 2.0: The manufacturer cooperation model, the so-called manufacturer cooperation mode, refers to the mode of cooperative operation between manufacturers and distributors, distributors, and other channels. Manufacturers were responsible for producing products, and distributors and other channel providers were engaged in selling products. The core of the model was the division of labor and cooperation.

(3) Business Model 3.0: The industrial chain mode means enterprises provide customers and consumers with more complete and systematic unique value through horizontal and vertical development. This business model was an industrial chain model based on competitiveness.

(4) Business Model 4.0: Platform ecosystem model. The so-called platform ecosystem model refers to the organic integration of the valuable resources of different networks held by different organizations through Internet technology so that the value of each resource can be improved. This business model emphasizes the spirit of symbiosis, win-win, and mutual wealth, emphasizing the establishment of a more complex competition and cooperation relationship between enterprises to form a new competition pattern. Business Model 4.0 expects to achieve 1 + 1 > 2 business value improvement (H. Li, 2017).

Liang (2018) integrated the traditional business model and incorporated the business operation transformation of Industry 4.0. His book “Business Model 4.0” described the innovative Business Model 4.0 corresponding to Industry 4.0. He proposes that Business Model 4.0 should include five aspects, (1) connection; the significant relationship era has arrived. Changes are needed in consumers, products, channels, organizations, and culture to cope with this era of meaningful connection. (2) Value: In the significant era, consumption is an all-around upgrade, diversified consumption scenarios, and the rise of collaborative consumption. Manufacturers need to understand what consumers want. They need to provide valuable goods or services in real-time. (3) Experience; the business model of 4.0 will change from a service economy to an experience economy, experience consumption will become the future trend, and participation will be the most important experience. Therefore, the design strategy of Business Model 4.0 marketing should focus on experience, and the value creation of the economic system can come from consumer experience. (4) Sharing; in the era of significant connection, you and I do not need to have a lot of resources on hand. We pursue the optimal allocation of resources, the reduction of marginal costs in production, and the improvement of marginal benefits. Consequently, the core of sharing is the effective allocation of resources. The ultimate goal is value sharing. (5) Win-win; The core goal of Internet applications is win-win. Achieving the purpose of joint operation requires the cooperation of altruistic behavior. It is the best business model to create a business ecosystem of mutual benefit and win-win.

Economic Theoretical Analysis of Business Model 4.0

The present theoretical study of the economic mechanism of Business Model 4.0 is mainly based on Brandenburger and Nalebuffs’ (1996), Ibarra et al.’s (2018), and Liang’s (2018) concepts of Business Model 4.0. This study is divided into (1) the transaction equilibrium, (2) the production equilibrium, (3) the general equilibrium, and (4) the resource allocation. These four aspects are explained in turn in the following.

Pareto efficiency or Pareto optimality is a situation where no individual or preference criterion can be made better off without making at least one individual or preference criterion worse off. Said another way, a Pareto efficiency is one for which each agent is as well off as possible, given the utilities of the other agents. It is well known that a more general objective of economic system is the idea of Pareto efficiency (Varian, 1992).

In the general equilibrium theory of the economic system, simultaneous equations are generally used to describe each market for the interdependence between economic factors; that is, a mathematical model is used to analyze the equilibrium state of the entire economic system. In the model of this study, it is assumed that the consumer (N) has an infinite number of people, that is, N = A, B, C…N. For the sake of simple analysis, the product market will be analyzed with two products (two kinds of i and j), and the factor market will be diagnosed with two types of production factors (two types of L and K). Of course, these conditions can be extended to m kinds of products and n kinds of production factors.

Transaction Equilibrium Analysis

The Internet under the operation of Business Model 4.0 is a business model based on cloud computing architecture with the following three characteristics; (1) Socialization: social platforms are gradually transformed into the network infrastructure. The big data generated by online social media provide consumers with sufficient information, accurately locate business behaviors and goals, and provide consumers with products and services. (2) Mobile: with the development of intelligent terminals, their portability characteristics and the ability to process information are gradually improved, which can meet the needs of people to obtain real-time information without being limited by time and space. Accordingly, Business Model 4.0 is based on smart terminals and mobile positioning functions, enabling consumers or producers to obtain just-in-time information. (3) Localization: this characteristic trend results from the continuous sinking of the Internet, causing the constant integration of the online virtual world and the offline real world. This result can be accurately positioned to meet the needs of a target customer group in a specific region and a business model that combines geographic services with other consumers, producers, or industries.

Hence, Business Model 4.0 is an era in which consumers are the central axis of thinking. Whether it is the optimization of the industrial value chain or the internal operation value chain, it is imperative to grasp the changes in consumer demand in real-time and provide feedback quickly. From a technological aspect of Business Model 4.0, it will be seamlessly connected with big data and cloud computing, whether a PC-based platform and community, a mobile-based application, vehicle-based, residential-based, or supermarket-based intelligent media. This model will provide real-time, sufficient, and transparent information for products or services needed by consumers through intelligent computing technology.

In the trading market of the economic system, the relevant discussion of economic theory is “Pareto efficient allocation.” The Pareto efficiency point is the point at which the marginal rate of substitution (MRS; marginal rate of substitution of i for j) of each consumer for a group of goods (i, j) is equal. The trajectory line connecting these points with equal marginal substitution rate is called the contract curve, also known as the Pareto efficiency allocation locus. That is,

{MRS}_{ij}^{A} = {MRS}_{ij}^{B} = . . . . = {MRS}_{ij}^{N} = \frac{P_{i}}{P_{j}}

(1)

where $A$ , $B$ , … $N$ represents $A$ consumer, $B$ consumer, … $N$ consumer;

$P_{i}$ and $P_{j}$ represent the prices of goods (i, j), respectively.

Therefore, Equation 1 shows the necessary condition for the equilibrium of Pareto allocation transactions. Under this condition, it also means in economic theory that the slope of the tangent point between the utility indifference curve and the income line is the same, and it is also equal to the relative price ratio ( $P_{i} / P_{j}$ ) of the commodity.

We all know that it may be different for the marginal substitution rate of goods among consumers under the traditional business model. For example, if the marginal rate of substitution of consumer A is greater than that of consumer B, that is, ${MRS}_{ij}^{A} =^{3} /_{1}$ , ${MRS}_{ij}^{B} =^{2} /_{1}$ . It means that consumer A is willing to exchange three units of commodity j for one unit of commodity i, while consumer B is willing to trade two units of commodity j for one unit of commodity i. Undoubtedly, the j commodity is more valuable to consumer B and less valuable to consumer A. In the traditional business model, we know that consumers may not perceive this unreasonable phenomenon for a long time. Hence, there is no further adjustment to each other’s marginal substitution rate under the information asymmetry of the traditional model. Pareto called this phenomenon when the commodity market transactions in society were unequal an inefficient state.

Under the operation of Business Model 4.0, consumers can obtain real-time, sufficient, and transparent information about products or services through the Internet. Consumer A will exchange commodity j for commodity i of consumer B in this situation. As the transaction proceeds, the j commodity of consumer A gradually decreases, and the i commodity gradually increases. After that, Consumer As’ value of these two commodities gradually changes, and the result of this transaction also causes his ${MRS}_{ij}^{A}$ decrease progressively. Similarly, Consumer B is willing to exchange with consumer A when it is easy to obtain complete and transparent information. Consequently, the ${MRS}_{ij}^{B}$ of consumer B gradually increases. The transaction between the two consumers will proceed until their MRS are equal. When the MRS of the people are the same, there is no incentive for them to exchange again. At this moment, the economic system will reach an equilibrium of transactions.

It can be seen from the above that in terms of transaction equilibrium, the economic system under the complete information symmetry operation of Business Model 4.0 can achieve transaction equilibrium more quickly and efficiently than the traditional business model. Moreover, the sequent equilibrium state of Business Model 4.0 is also more sustainable over a long period.

Production Equilibrium Analysis

In the era of Industry 4.0, the Internet and the Internet of Things have penetrated all aspects of industrial production. At the level of production logic, Industry 4.0 requires the transformation from traditional brain analysis, judgment, and machine manufacturing to machine analysis and judgment applied to manufacturing processes. Industry 4.0 emphasizes “intelligent production,” which refers to integrating advanced technologies such as the Internet of Things, mobile Internet, cloud computing, big data, human-computer interaction, intelligent logistics management, 3D printing, etc. They are applied to the entire industrial production process to form a thoughtful, personalized, networked, and highly flexible industrial chain.

Studies of Industry 4.0 appear in a broad range of fields with great potential to increase the efficiency of the industry. Some scholars suggested that improving the agricultural extension material on industrial 4.0 should be considered to increase the productivity of rice cultivation by providing a higher technical efficiency level (Pratama et al., 2022). Most of the researchers have all pointed out that the performance score can be further raised by improving the factors that affect efficiency in the current industrial system. These factors included company age, number of internal boards, number of shareholders, R&D, government policies, quality of personnel, etc. (Lin et al., 2022).

The traditional production logic has been absorbed and subverted by Industry 4.0, and the existing conventional production system will be extended to the production of Industry 4.0. From this, we know Industry 4.0 already has the following characteristics: (1) internet manufacturing, (2) logistics with strong self-organization and regulation, (3) manufacturing engineering that meets customers’ needs, etc. The above mentioned make it necessary to have a dynamic business network to cope with the pursuit of a new business model in the era of Industry 4.0. Therefore, Business Model 4.0 needs to reflect that the current production model has undergone significant changes. The entire economic system is already a highly flexible, transparent, and intelligent production system.

The core concept of intelligent production of Business Model 4.0 has emerged. This concept uses Internet technology to connect every link of commodity production. This model enables businesses and consumers to have direct dialog, allows consumers to participate in the product value chain, and converts scattered consumer demand data into production data, achieving seamless integration between supply and demand. Clearly, the manufacturers of Industry 4.0 must have a high degree of intelligence, mobility, and flexibility in terms of input of production factors to meet the requirements of the Business Model 4.0.

In the analysis of production equilibrium, the method as mentioned above transaction equilibrium can be used, that is, when the technical substitution rates (RTS; rate of technical substitution of L for K) of production factors L and K used by two manufacturers are not equal, the mobility and flexibility of the Business Model 4.0 era can cause one manufacturer to increase the use of L and reduce the use of K, while another manufacturer will increase the use of K and reduce the use of L. This trend will be adjusted rapidly until the two manufacturers’ marginal substitution rate of production factors is equal. At this time, when the technical substitution rates of the two production factors are equal, neither manufacturer will replace one production factor with the other production factor. Therefore, the equilibrium of the production market is described by the following equation,

{RTS}_{LK}^{i} = {RTS}_{LK}^{j}

(2)

Equation 2 is the necessary condition for the production equilibrium of the two production factors and the products. This condition also shows that the slope of the isoquant curve is the same for both goods. Currently, they also face the same factor price ratio ( $P_{L} / P_{K}$ ). Hence, Equation 2 can also be written as Equation 3:

{RTS}_{LK}^{i} = {RTS}_{LK}^{j} = \frac{P_{L}}{P_{K}}

(3)

Similarly, in the general case where there are n kinds of products and m kinds of production factors, the equilibrium condition of the production sector is: “the rate of technological substitution between any two production factors, no matter which product is produced, must be equal.” The curve obtained by connecting these points with equal rates of technological substitution is called the “production contract curve.” Generally speaking, these points that meet the conditions of (3) are called “Pareto optimum points.”

Obviously, the production contract curve has met the requirements of “efficient production” mentioned in the production theory in economics. That is to say, “when a product maintains a certain level of output, the production of other products must achieve its maximum production,” and at this time, this curve is also called the “Pareto optimum locus.” This paper argues that the flexibility and elasticity of Business Model 4.0 make it easy for producers in the production sector to achieve the optimal trajectory of production factor in the production of products or services.

General Equilibrium Analysis

The above description has separately analyzed the transaction equilibrium and production equilibrium under the operation of Business Model 4.0, but these two departments are independent of each other. Therefore, the productive sectors of the economic system may be in equilibrium, but the trading sectors are not in equilibrium at the same time, or the trading sectors of the system are in equilibrium, but the productive sectors are not at the same time. Thus, the production sector and the transaction sector under the operation of Business Model 4.0 should be considered together to obtain the general equilibrium of the economic system.

During the asymmetry of information, the production sector in the economic system has reached efficient production; that is, the production combination has been produced on the production possibility curve, which already satisfies the marginal rate of transformation (MRT) equal to the marginal cost ratio of the product. However, this production combination cannot satisfy to maximize the satisfaction of consumers. The reason why the two sectors do not reach equilibrium simultaneously may be due to the asymmetry of information in the traditional business model. In short, the production sector of the economic system has reached $MR T_{ij} =^{M C_{i}} /_{M C_{j}}$ , and the transaction sector of them has also come to ${MRS}_{ij}^{A} = {MRS}_{ij}^{B} = . . . . = {MRS}_{ij}^{N} =^{P_{i}} /_{P_{j}}$ simultaneously. However, due to information asymmetry in the economic system, $MR T_{ij}$ is not equal to ${MRS}_{ij}$ at the same time.

In the era of Business Model 4.0, producers are consumers, or producers and consumers will communicate with each other offline or online through the Internet. Therefore, it is assumed that the economic system has the above-mentioned temporary deviation from equilibrium:

\frac{P_{i}}{P_{j}} > \frac{M C_{i}}{M C_{j}}

(4)

From Equation 4, we can interpret it as: the price ratio of commodity i to commodity j is greater than the marginal cost ratio of the two commodities. If we understand that the reason for this situation is due to the relationship between $P_{i} > M C_{i}$ and $P_{j} < M C_{j}$ . This shows that the output of commodity i in production sector is too little, and the output of commodity j is too much at this time.

Through online or offline communication between producers and consumers, manufacturers find it beneficial to increase production of i-commodities or reduce the production of j-commodities, and consumers also perceive that it is valuable to reduce consumption of i-commodities or consume more of j-commodities in the era of Business Model 4.0. With the rapid transmission of information between producers and consumers on the Internet, it can be found that $P_{i}$ and $M C_{j}$ will decrease, as well as $P_{j}$ and $M C_{i}$ will increase. Obviously, some information asymmetries between producers and consumers in the circumstance of Business Model 4.0 are quickly processed into complete information, resulting in a rapid change in the equilibrium of the economic system to become $P_{i} = M C_{i}$ , $P_{j} = M C_{j}$ . That is, Equation 4 in the economic system will soon be revised to Equation 5;

\frac{P_{i}}{P_{j}} = \frac{M C_{i}}{M C_{j}} i . e . {MRS}_{ij}^{A} = {MRS}_{ij}^{B} = . . . . = {MRS}_{ij}^{N} = MR T_{ij}

(5)

Every market segment in traditional business activities is subdivided very clearly. Each link between production, sales, and consumption corresponds to one of them respectively, and the boundaries between them are obvious. Factories are responsible for producing, stores are responsible for sales, and consumers are the buyers. In Business Model 4.0, consumers are not only involved in the production process but also in product sales. This demonstrates that the definition of consumers will not be limited to the traditional buyer status but will shift to the concept of “producer and seller.” Therefore, the boundaries between consumers and producers have become blurred in this Business Model 4.0, and the two have merged into one, becoming “the producer is the consumer.” The behavior of consumption and production in the economic system can achieve the effect of mutual sharing and win-win.

It can be found that in the context of Business Model 4.0, the product-related information of consumers and manufacturers can be instantly exchanged and shared through the big data analysis of the Internet. This makes it possible to eliminate the information asymmetry between the producers and consumers through the rapid information transmission of producers and consumers in the Internet. This also realizes it possible for the economic system to quickly achieve inter sectoral equilibrium when the production sector and the trading sector of the economic system do not reach equilibrium at the same time.

Resource Allocation Analysis

From the above analysis, we know that under the operation of Business Model 4.0, the following three conditions can be easily and quickly achieved in terms of resource allocation in the economic system:

(1) Transaction sectors; ${MRS}_{ij}^{A} = {MRS}_{ij}^{B} = . . . . = {MRS}_{ij}^{N} = \frac{P_{i}}{P_{j}}$ ,

(2) Production sectors; ${RTS}_{LK}^{i} = {RTS}_{LK}^{j} = \frac{P_{L}}{P_{K}}$ ,

(3) General Equilibrium; ${MRS}_{ij} = \frac{P_{i}}{P_{j}} = \frac{M C_{i}}{M C_{j}} = MR T_{ij}$ .

The three conditions are expressed as: (1) transaction sectors; the marginal rate of substitution between any two goods must be equal in both trades, and this condition already shows an efficient allocation of consumers. (2) production sectors; regardless of which product is produced, the rate of technological substitution between any two factors of production must be equal. This condition already shows the efficiency of the producer. (3) general equilibrium; the marginal rate of substitution of any two goods must be equal to their marginal rate of transformation. This condition also reveals that the product price paid by consumers is equal to the cost paid by producers to produce the product.

In order to achieve these conditions in economic theory, the state of market competition must be perfect competition. We understand that under the operation of Business Model 4.0, information in the economic system is shared and enjoyed together so that some information asymmetry between producers and consumers is quickly transformed into the information of perfect competition. As a result, the commodity price in the system will be equal to the marginal cost. Concisely, the system equilibrium under the operation of Business Model 4.0 is the effective allocation of accessible resources, so that producers and consumers can achieve a win-win equilibrium under the operation of this model.

During the development of the Fourth Industrial Revolution, the government needs to formulate policies to reduce carbon dioxide emission levels by promoting energy-saving systems, thereby maintaining the sustainable development of the country’s long-term economy (Cheng et al., 2021). The research community has hotly debated the Bio-Circular-Green (BCG) Economy Model in this era of Industry 4.0. The digital technologies and BCG economy interface have recently been areas of focus (Okorie et al., 2018). Some scholars have focused on studying the relationship between Industry 4.0 and the productivity of BCG (Buer et al., 2018). Some governments have already adopted and implemented it. For example, the Thai government introduced and promoted this model as a new economic model for inclusive and sustainable growth. During economic development, the BCG model leverages a country’s strength in biodiversity and cultural richness. Scholars have defined the circular economy as an economic system based on recycling, reusing, reducing, and extracting materials from end-of-life products to achieve long-term sustainable development aims (Kirchherr et al., 2017).

Betancourt Morales and Zartha Sossa (2020) have shown interest in how responsible production and consumption within a system generate economic value through waste management and recycling in the circular economy. There are lots of literature on Industry 4.0 and BCG economy, which has enhanced our understanding of the manufacturing industry’s capacity of the IoT in the circular economy (Nobre & Tavares, 2017). In order to improve the implementation of IoT and BCG economy initiatives, it is necessary to understand the expectations and attitudes of stakeholders, including the customers, suppliers, and government (Wen et al., 2018). To successfully implement remanufacturing and recycling services, we should better understand the different external and internal elements, such as stakeholders and organizational culture, etc. (Alcayaga et al., 2019). It can be known from the above that BCG’s model is significantly related to business model 4.0. Obviously, BCG’s model seems able to interpret some aspects of business model 4.0.

Some researchers consider Industry 4.0 to be IoT-based technologies for the provision of digital solutions. As such, they see Industry 4.0 as a complex system of interrelated technologies. There are many aspects to be considered in Industry 4.0, including reciprocal changes between participants, as well as in value exchange and the expected return from the social exchange, etc. Hence, technology providers can co-create value by integrating resources in the ecosystem. The model uses technology and innovation to transform one country into a value-based and innovation-driven economic system (Benitez et al., 2020). People have long been used to IoT, artificial intelligence (AI), and other advanced computing technologies in agriculture. The experimental results have been done for various crops in terms of accuracy, precision, recall, and F-1 score to obtain above 80% by the proposed technique (Anupong, Shukla, et al., 2022). In today’s Big Data operation, the Internet of Things (IoT), cloud computing (CC), and other ideas and technologies are combined for social interactions. At present, the effective tool for Financial crisis prediction (FCP) can be used to forecast the financial failures and crises of small and medium-sized enterprises. To predict the Financial crisis, some scholars develop an oppositional ant-lion optimizer-based feature selection with a machine learning-enabled classification model for FCP in a big data environment. Consequently, Big Data technology can enhance the processing of financial data for enterprises, improving operational efficiency and avoiding crises (Yalla et al., 2022).

Some scholars have proposed that novel technique in monitoring and control optimization of soft sensors was highly desirable with fault detection in the automation industry. In modern industrial processes, various soft sensors are used, which play essential roles in process monitoring, control, and optimization. Hence, these advanced techniques and the information infrastructure have enabled the elevation of the performance of soft sensing and are used to increase efficiency in the automation industry (Anupong, Abourehab, & Ahmed, 2022). In smart cities with multiple collections and transmissions, the function of the wireless sensor system is typically essential. The Grid Topological Network Architecture can offer an efficient route if a fault-tolerance networking system is presented in the automated process. It is observed that delivery loss, mean response, and delay response is lowered by implementing the method based on the AMI (Advanced Meter Infrastructures) architecture of the fault-tolerance networking system. Therefore, the AMI architecture is a significant determinant of the fate of the electrical cable network, as it eliminates people interaction while enhancing the efficiency and speed of invoice meter readings (Anupong, Azhagumurugan, et al., 2022).

In Industry 4.0, IoT is used in many industries to reuse, recycle, and repair items, making the circular economy faster (Valerio, 2017). Most of this literature has focused on Industry 4.0 and the circular economy, especially in manufacturing, focusing on explaining the benefits of IoT for circular economy initiatives. The research on industry 4.0 appears in a wide range of fields and has excellent potential to reduce the impact on the environment (Reinhard et al., 2016). Some people see industry 4.0 mainly as a means to protect the environment, while others see it as an opportunity to reduce risks and improve productivity (Stock & Seliger, 2016). Therefore, the future of Industrial 4.0, extremities would be deeper and adaptive techniques would be needed. The modeling technology of business 4.0 operation mode is necessary (Anupong, Lin, et al., 2022). As a result, it can be used as a way for the government or decision-makers to make a good judgment on the required adaptation measures.

The single-market story described above Business 1.0, 2.0, 3.0 is a partial equilibrium model in that all prices other than the price of the good being studied are assumed to remain fixed. Business 4.0 is in pursuit of a general equilibrium model. In the general equilibrium model all prices are variable, and equilibrium requires that all markets clear (Varian, 1992). Thus, the business 4.0 operation model will be an important policy recommendation direction for a country’s economic development in the future. Nonetheless, the long-term maintenance of “Pareto efficiency” requires that every member of the Internet must have “altruistic” behavior in the economic system in Business Model 4.0. Because the economic system lacks this altruistic factor, it may fall into the game theory of Nash, J.; the economic system will have the result of the non-cooperative game, then “Pareto efficiency” will likely be destroyed (Nash, 1951, 1953). That is to say, although the economic system operates under the Business Model 4.0, information can be quickly disseminated through the links of the Internet. However, if there is still a little information asymmetry or some elements in the network do not have “altruistic” behaviors to share information, or even hide information and destroy information sharing, or take uncooperative, “sneaky,” selfish behavior, etc., the economic equilibrium will be disrupted in Business Model 4.0. It will cause the inability to effectively allocate resources, and if the value created together cannot be mutually beneficial, then the “Pareto efficiency” phenomenon of the system will also disappear.

Conclusion

In the era of Industry 4.0, the Internet will have an impact on human life. People use the Internet to carry out business transactions such as social networking, shopping, and services. The distribution and reception of information through the transmission of the Internet have also become more immediate and convenient. This increases the channels for people to obtain information, which also directly affects the production of factory products and indirectly affects consumer behavior.

The essence of commercial activities is to create value, and the purpose of consumers to purchase commodities is to obtain commodity value. The value of commodities in the new era has been redefined as that people buy commodities not only to meet the needs of users but also to obtain the consumption experience. Consumer experience will become the value core of commodities. If a company wants to sell a product, it must understand what kind of product consumers want. To provide consumers with more consumption experience, enterprises should not only gradually open related links such as commodity production and sales, but also cooperate with different enterprises and even different industries to improve the value of products and attract consumers.

Business Model 4.0 will be described by five core concepts: link, value, experience, sharing, and win-win. Among them, “link” can best reflect the new characteristics of the Internet era, “sharing” is the interconnection between different links of the industrial chain, and the development of “information technology” provides technical support for the interconnection of the industrial chain.

In the operation of Business Model 4.0, every member of the economic system participating on the Internet must have “altruistic” behavior. Without this factor, the “Pareto efficiency” of the economic system may be destroyed. This aspect of the issue needs to be further explored in the future to clarify the impact of the selfish behavior of “being sneaky” on Business Model 4.0. In conclusion, we must establish altruistic behavior for each participant in Business Model 4.0, so that the economic system can remain in an efficient operating environment for a long time. This issue still needs subsequent research and discussion.

Footnotes

Declaration of Conflicting Interests

The author(s) declared no potential conflicts of interest with respect to the research, authorship, and/or publication of this article.

Funding

The author(s) received no financial support for the research, authorship, and/or publication of this article.

ORCID iD

Chiou-Wen Chen

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