Assuming that the person has money in his or her account and meets the rental criteria, the QR code will open the electronic bike lock. When the bike is returned, closing the lock completes the transaction. The process is simple, intuitive, and usually takes only several seconds. Datafying the rental process greatly improves the consumer experience. On the basis of live data, companies dispatch trucks to move bikes to where users want them.
They can also alert regular users to the availability of bikes nearby. Thanks in large part to these innovations, the cost of bike rentals in China has fallen to just a few cents per hour. Most businesses that seek to be more data-driven typically collect and analyze information in order to create a causal model. The model then isolates the critical data points from the mass of information available.
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That is not how smart businesses use data. Instead, they capture all information generated during exchanges and communications with customers and other network members as the business operates and then let the algorithms figure out what data is relevant. In a smart business, all activities—not just knowledge management and customer relations—are configured using software so that decisions affecting them can be automated.
This does not mean that a firm needs to buy or build ERP software or its equivalent to manage its business—quite the opposite. Traditional software makes processes and decision flows more rigid and often becomes a straitjacket. In contrast, the dominant logic for smart business is reactivity in real time. The first step is to build a model of how humans currently make decisions and find ways to replicate the simpler elements of that process using software—which is not always easy, given that many human decisions are built on common sense or even subconscious neurological activity.
The growth of Taobao, the domestic retailing website of Alibaba Group, is driven by continuous softwaring of the retailing process. One of the first major software tools built on Taobao was an instant message tool called Wangwang, through which buyers and sellers can talk to each other easily.
Using the tool, the sellers greet buyers, introduce products, negotiate prices, and so on, just as people do in a traditional retail shop. Alibaba also developed a set of software tools that help sellers design and launch a variety of sophisticated online shop fronts. Once online shops are up and running, sellers can access other software products to issue coupons, offer discounts, run loyalty programs, and conduct other customer relationship activities, all of which are coordinated with one another.
Because most software today is run online as a service, an important advantage of softwaring a business activity is that live data can be collected naturally as part of the business process, building the foundation for the application of machine-learning technologies. In ecosystems with many interconnected players, business decisions require complex coordination. Its transaction systems need to work with discount offers and loyalty programs, as well as feed into our logistics network.
New software had to be broadly interoperable with all other software on the platform to be of any value. So in , Taobao began developing APIs for use by independent software suppliers. Getting the technical infrastructure right is just the beginning. Additionally, figuring out the right incentive structures to persuade companies to share the data they have is an important and ongoing challenge.
Much more work is needed. But the direction is very clear: The more data flows across the network, the smarter the business becomes, and the more value the ecosystem creates. Once a business has all its operations online, it will experience a deluge of data. To assimilate, interpret, and use the data to its advantage, the firm must create models and algorithms that make explicit the underlying product logic or market dynamics that the business is trying to optimize. This is a huge creative undertaking that requires many new skills, hence the enormous demand for data scientists and economists.
Their challenge is to specify what job they want the machine to do, and they have to be very clear about what constitutes a job well done in a particular business setting. This would have been impossible without advances in machine learning. Today, when customers log on, they see a customized webpage with a selection of products curated from the billions offered by our millions of sellers. Taobao has also been experimenting with optical-recognition search algorithms that can take a photo of a desired item supplied by the customer and match it to available products on the platform.
While we are still in the early stages of using this technology to drive sales, the function has proved very popular with customers, boasting 10 million unique visits daily. In , Alibaba introduced an AI-powered chatbot to help field customer queries. It is different from the mechanical service providers familiar to most people that are programmed to match customer queries with answers in their repertoire.
Using a variety of machine-learning technologies, such as semantic comprehension, context dialogues, knowledge graphs, data mining, and deep learning, the chatbots rapidly improve their ability to diagnose and fix customer issues automatically, rather than simply return static responses that prompt the consumer to take further action.
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They confirm with the customer that the solution presented is acceptable and then execute it. No human action by Alibaba or the merchant occurs. There will always be a need for human customer representatives to deal with complicated or personal issues, but the ability to handle routine queries via a chatbot is very useful, especially on days of high volume or special promotions.
Previously, most large sellers on our platform would hire temp workers to handle consumer inquiries during big events. Not anymore. Market economies range from minimally regulated free market and laissez-faire systems where state activity is restricted to providing public goods and services and safeguarding private ownership,  to interventionist forms where the government plays an active role in correcting market failures and promoting social welfare. State-directed or dirigist economies are those where the state plays a directive role in guiding the overall development of the market through industrial policies or indicative planning —which guides yet does not substitute the market for economic planning —a form sometimes referred to as a mixed economy.
Market economies are contrasted with planned economies where investment and production decisions are embodied in an integrated economy-wide economic plan. In a planned economy, economic planning is the principal allocation mechanism between firms rather than markets, with the economy's means of production being owned and operated by a single organizational body. Market economies rely upon a price system to signal market actors to adjust production and investment. Price formation relies on the interaction of supply and demand to reach or approximate an equilibrium where unit price for a particular good or service is at a point where the quantity demanded equals the quantity supplied.
Governments can intervene by establishing price ceilings or price floors in specific markets such as minimum wage laws in the labor market , or use fiscal policy to discourage certain consumer behavior or to address market externalities generated by certain transactions Pigovian taxes. Different perspectives exist on the role of government in both regulating and guiding market economies and in addressing social inequalities produced by markets. Fundamentally, a market economy requires that a price system affected by supply and demand exists as the primary mechanism for allocating resources irrespective of the level of regulation.
For market economies to function efficiently, governments must establish clearly defined and enforceable property rights for assets and capital goods. However, property rights does not specifically mean private property rights and market economies do not logically presuppose the existence of private ownership of the means of production. Market economies can and often do include various types of cooperatives or autonomous state-owned enterprises that acquire capital goods and raw materials in capital markets.
These enterprises utilize a market-determined free price system to allocate capital goods and labor. These models range from systems based on employee-owned enterprises based on self-management to a combination of public ownership of the means of production with factor markets. Capitalism generally refers to an economic system where the means of production are largely or entirely privately owned and operated for a profit, structured on the process of capital accumulation.
In general, in capitalist systems investment, distribution, income and prices are determined by markets, whether regulated or unregulated. There are different variations of capitalism with different relationships to markets. In laissez-faire and free market variations of capitalism, markets are utilized most extensively with minimal or no state intervention and minimal or no regulation over prices and the supply of goods and services. In interventionist , welfare capitalism and mixed economies , markets continue to play a dominant role, but they are regulated to some extent by government in order to correct market failures or to promote social welfare.
Capitalism has been dominant in the Western world since the end of feudalism , but most feel [ who? In capitalism, prices determine the demand-supply scale. For example, higher demand for certain goods and services lead to higher prices and lower demand for certain goods lead to lower prices. Free-market economy refers to an economic system where prices for goods and services are set freely by the forces of supply and demand and are allowed to reach their point of equilibrium without intervention by government policy. It typically entails support for highly competitive markets, private ownership of productive enterprises.
Laissez-faire is a more extensive form of free-market economy where the role of the state is limited to protecting property rights.
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Laissez-faire is synonymous with what was referred to as strict capitalist free-market economy during the early and midth century [ citation needed ] as a classical liberal ideal to achieve. It is generally understood that the necessary components for the functioning of an idealized free market include the complete absence of government regulation, subsidies, artificial price pressures and government-granted monopolies usually classified as coercive monopoly by free market advocates and no taxes or tariffs other than what is necessary for the government to provide protection from coercion and theft, maintaining peace and property rights and providing for basic public goods.
Right-libertarian advocates of anarcho-capitalism see the state as morally illegitimate and economically unnecessary and destructive. Although laissez-faire has been commonly associated with capitalism, there is a similar left-wing laissez-faire system called free-market anarchism , also known as free-market anti-capitalism and free-market socialism to distinguish it from laissez-faire capitalism. Welfare capitalism refers to a capitalist economy that includes public policies favoring extensive provisions for social welfare services.
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The economic mechanism involves a free market and the predominance of privately owned enterprises in the economy, but public provision of universal welfare services aimed at enhancing individual autonomy and maximizing equality. Examples of contemporary welfare capitalism include the Nordic model of capitalism predominant in Northern Europe.
Anglo-Saxon capitalism refers to the form of capitalism predominant in Anglophone countries and typified by the economy of the United States. It is contrasted with European models of capitalism such as the continental social market model and the Nordic model. Anglo-Saxon capitalism refers to a macroeconomic policy regime and capital market structure common to the Anglophone economies.
Among these characteristics are low rates of taxation, more open financial markets , lower labor market protections and a less generous welfare state eschewing collective bargaining schemes found in the continental and northern European models of capitalism. The East Asian model of capitalism involves a strong role for state investment and in some instances involves state-owned enterprises.
The state takes an active role in promoting economic development through subsidies, the facilitation of "national champions" and an export-based model of growth. The actual practice of this model varies by country.
A related concept in political science is the developmental state. The social market economic model sometimes called Rhine capitalism is based upon the idea of realizing the benefits of a free-market economy, especially economic performance and high supply of goods while avoiding disadvantages such as market failure , destructive competition, concentration of economic power and the socially harmful effects of market processes. The aim of the social market economy is to realize greatest prosperity combined with best possible social security.
One difference from the free market economy is that the state is not passive, but instead takes active regulatory measures. Characteristics of social market economies are a strong competition policy and a contractionary monetary policy. The philosophical background is neoliberalism or ordoliberalism.
Market socialism is a form of market economy where the means of production are socially owned.
In a market socialist economy, firms operate according to the rules of supply and demand and operate to maximize profit; the principal difference between market socialism and capitalism being that the profits accrue to society as a whole as opposed to private owners. The distinguishing feature between non-market socialism and market socialism is the existence of a market for factors of production and the criteria of profitability for enterprises. Profits derived from publicly owned enterprises can variously be used to reinvest in further production, to directly finance government and social services, or be distributed to the public at large through a social dividend or basic income system.
Market socialism traces its roots to classical economics and the works of Adam Smith , the Ricardian socialists and mutualist philosophers. In the s, the economists Oskar Lange and Abba Lerner developed a model of socialism that posited that a public body dubbed the Central Planning Board could set prices through a trial-and-error approach until they equaled the marginal cost of production in order to achieve perfect competition and pareto optimality.
In this model of socialism, firms would be state-owned and managed by their employees and the profits would be disbursed among the population in a social dividend. This model came to be referred to as market socialism because it involved the use of money, a price system and simulated capital markets, all of which were absent from traditional of non-market socialism. A more contemporary model of market socialism is that put forth by the American economist John Roemer , referred to as economic democracy.