**3. Evolution of Industry 4.0 and implications for global business**

Research on Industry 4.0 is numerous and rapidly evolving. Many types of research have addressed the evolution of the Industry 4.0 (I4.0) phenomenon and its contribution to international business activities. Especially the major drivers of I4.0 that underlines its involvement to enhance current business practices by streamlining both the production and supply chain networks [30, 31]. Those developments in Industry 4.0 have huge implications on the way the current business activities both at home as well as across the globe (i.e., international trade) are being conducted. Mamad [2] has addressed how Industry 4.0 works and has made a broad illustration of the subject in detail through an exhaustive literature review. Deloitte [3] provided an overview of the beneficial application of Industry 4.0 to enhance organizational processes. McKinsey's [6] study focused on customization and explained how Industry 4.0 has reshaped the manufacturing industry to fit

customer demand and how companies can reap profit from these upcoming innovations by showing application opportunities. UNIDO [32] report has presented an impact analysis and showed how Industry 4.0 could contribute to environmental sustainability. Jayashree et al. [33] showed how Industry 4.0 could contribute to developing dynamic capabilities and realizing triple bottom line (TBL) sustainability. Bibby et al. [34] give some tools to assess the current level of Industry 4.0 maturity of businesses that want to transition to I4.0 and better approach the issue. Dhanpat [35] reminds us of the underlying dimensions of I4.0 as a growing need for learning capacities of smart technologies to cope with the new era of cyber-physical systems. Ahmadi et al. [36] addressed the main architecture models of value-chain structure in Industry 4.0.

#### **3.1 Industry 4.0 and international trade**

Industry 4.0 brings both enormous opportunities and challenges for the industry and international trade. It helps not only to modernize the production process and self-initiated execution but also allow the managers to undertake the management of the production process across the globe by creating a flexible global supply chain.

The fourth industrialization is changing the way we perform different kinds of business activities by drawing its main components and their contribution to the business environment. Industry 4.0 is the implementation of cyber-physical systems for creating smart factories by using the IoT, big data, cloud computing, artificial intelligence (AI), and communication technologies for information communication in real-time between the man-machine and machine to machine communication which is redefining the global value chain.

According to Horvàth et al. [37], there are five key drivers of Industry 4.0: Digitalization, optimization, and customization of the production, automation, and adaptation, human and machines interactions, and collaborations, high value-added offers, and automatic exchanges of data and communication. The fourth industrialization has contributed to critical transformation to the international business environment in the different stages of an organization such as human resources, financial systems, management, organizational structure, or production processes.

Those key drivers are highly illustrated by the implementation of cyber-physical systems, the internet of things, smart factories, smart technologies, cloud computing, and big data. The latest architecture of industrialization pursues new objectives and faces completely different challenges that increase in a global perspective. Industry 4.0 offers an opportunity of restructuring declining manufacturing industry in the high-cost-country (HCC) and permit to maintain a strong industrial base in developed countries [38]. It could represent a great opportunity in the context of declining manufacturing in the developed markets. Industry 4.0 answers three key challenges: better competitiveness, flexibility, and agility by facing global offer end demand fluctuation and the regionalization of production [38]. To sum up, Industry 4.0 can be understood as multiple solutions built to change the international industrial sector to gain stronger competitive positions, market shares, especially within a risky business environment. This ambition should be realized by using smart technologies and factories that ensure efficient response to the variation of the global market by improving competitiveness and agile management, which will conduct the changes implied by Industry 4.0.

#### **3.2 Industry 4.0 and implications for international businesses**

Central to the fourth industrial revolution is an interconnected network. The internet enables many small firms to participate in global trade, thus, leading

#### *Evolution of Industry 4.0 and Its Implications for International Business DOI: http://dx.doi.org/10.5772/intechopen.101764*

to more inclusion. It makes it possible for more products to be exported to more markets, often by newer and younger firms. A 10-percent increase in internet use in the exporting country is found to increase the number of products traded between two countries by 0.4 percent. A similar increase in internet use of a country pair increases the average bilateral trade value per product by 0.6 percent [39]. The transformation implied by the fourth industrialization, Industry 4.0, might lead to significant changes in existing business models allowing new ways to create value. These changes are expected to result in the transformation of traditional value chains. Industry 4.0 affects three elements of manufacturing small and medium enterprises (SMEs): value creation, value capture, and value offer [37].

The 4th industrialization will completely change global value chains by transforming its practices and objectives. The purpose is not limited to monetary rewards but includes new trends such as the willingness to gain efficiency, to create and sustain global competitive advantages, finding new ways of producing, generating innovations, stimulating automation and learning, or even increasing customer implications in the production processes.

Several opportunities generated by Industry 4.0 are transforming the current business levels and activities through its drivers. Multiple business models are flourishing in the Industry 4.0 era. One of the fast-emerging models of them is the *expectation* [40]. The expectation represents a combined model in which a firm built its expertise through the production processes of its general offer. This new trend led a company to create consulting services (about products or processes) or a new platform-based model. The platformization of the product refers to a company that uses its know-how and intensive capacities of production to create digital products that answer customer queries by using a cloud-based platform. The platformization of processes reflects the use of the smart factories' concepts and internal processes to transform their capacities into a digital platform. The value created is the result of an integrated solution of digital products and related Information technologies services. The expectation gives us an illustration of how I4.0 changes our model to do business and how complex it is to put in place within an organization and will impact the current business activities. The major Industry 4.0 drivers will redefine business activities [30].

Internet of things (IoT) is retained as a pillar of I4.0. This type of technology provides access to the internet by using deep learning technologies. This equipment transforms machines into smart objects that could, for instance, detect wear, control the performance of the production process, plan the capacity or even manage stocks in real-time. Cloud computing allows interconnection between computers and the internet. It can solve many issues such as Big Data storage as well as the costs and capacities linked to this storage.

Cyber-physical systems (CPS) are mechanisms that allow Humans, software, and machines to interact. It implies an aggregate level of networking. The main purposes of this technique are, by creating such virtual interconnection, to exchange key information to make better strategic decisions. It establishes strong links between production processes, machines, and the virtual world, which work and communicate thanks to computation and the internet in real-time cooperatively. The machines and physical systems will be synchronized to software, and it will allow the control and assessment in real-time production efficiency, adjusting it and making the right strategic decisions easily. Also, CPS enhances the integration of autonomous machines and the collaboration between humans and cyber work.

*Autonomous robots* are created with deep learning capacities. Deep learning technological advances permit a robot endowed with artificial intelligence to adapt itself to its working environment, make adjustments that enhance its working environment, and take appropriate decisions when observing disruptive issues. This is one of the major pillars of I4.0 that is very challenging as it can replace Human works forward and generate greater benefit for a company. Enterprise resource planning (ERP) systems are considered the backbone for the Industry 4.0 [41]. ERP systems, for instance, the systems Applications and products in data processing (SAP) software, helps companies in various areas, to manage better their processes, and enhance their efficiency by integrating its operations to increase flows of information and collaboration between the company and its partners. ERP systems help companies in many areas starting from increasing better information sharing between departments, improving workflow, better supply chain management, integrating of data, processes, and technology in real-time across internal and external value chains, standardization of various business practices, improve orders management and accurate accounting information of inventory management [42].

The result of the use of the different drivers (IoT, CPS, Internet of Service, ERP) will lead to the creation of smart factories, which brings all the smart tools and models together in its production model. This integrated system will facilitate the globalization of production and expansion of global supply chain. It is true that some of manufacturing activities might be re-shored but at the same time, the new smart technology will allow firms to reconfigure their production network overlooking the national boundaries and distance. That is the reason why it is still in the pre-paradigmatic stage of Industry 4.0. implications it is a continuous process that conducts the transformation of our current or traditional methodologies to do business and conceive industrial purposes and processes. As a result, the production model of smart factories becomes cost-effective and flexible to market changes and sustainable, which would reflect the highest level of effectiveness feasible to achieve. This newfound technological prowess will modify drivers of global production networks (GPN), reduce the importance of physical distance as well as reconfigure the global value chain (GVC). The new global division of labor (NGDL) is likely to emerge and re-distribute the manufacturing activities integrating different hubs from both the developed, emerging, and developing markets.
