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Intangible Resources and Management Authority in Organizations

The sphere of business is very diverse and every company tries to do its best in order to be the fist in the completive market and preserve its positions. Good presentation and work of the company depends upon its management that performs different functions. The main function of the management is organizing process of work correctly, using the resources of the company in the best possible way. From the one hand it sounds very easy to do, but on the other hand this task is not so easy to do. So, the main obligation of the management of every company is a rational utilization of the company’s assets and resources, tangible as well as intangible. There is a mistaken idea that intangible assets are not very important as they do not play such important role in the successful existence of the company. It is a common mistake of many managerial teams that do not pay enough attention to the intangible resources. According to Berkeley-Thomas (2003, p. 25), the companies have to genuinely consider a significance of identical or greater effect of such factors as consumer satisfaction, process effectiveness and improvement when coming to a realizing of performance realities. These factors will be additional to an organization’s realizing of financial figures, helping to better understand the significance of otherwise potentially misleading or unfortunate numbers. Most companies do not pay enough attention to the intangible assets that is why the general performance of the company suffers. In this case, experienced market leaders insist on considering the intangible assets greatly, as they are half of a company’s success (Grey, 2009, p. 43). In the findings, the investigation demonstrated that intangible assets, comprising consumer list, brand name,  reputation of the company, and its location are considerably chief elements; in the meantime, the  size of the organization is taken into account, but not that significant.

In general, the essence of the intangible resources is quite broad, as it comprises many notions. Intangible assets can also include patents, copyrights, franchise and government licenses, goodwill, and other issues that lack physical matter but give long-standing advantages to the company. Companies should pay attention to the intangible assets as much as they do it on depreciable and natural resources. The charge of intangible resources is methodically allocated to the costs during the asset's helpful life or legal life, whichever is shorter, and this life is never permitted to exceed forty years. The procedure of allocating the value of intangible resources to expense is called amortization, and organizations almost always use the straight-line way to amortize their intangible resources.

In order to understand more completely the essence intangible resources that management can draw upon, it is necessary to describe briefly some of them to see how useful they can be for the management of the company to evaluate the level of its performance and success.  One of the first and the most important intangible resources is the brand name. Needless to say, that brand name and recognition is very important for every company as it is the first step for the company’s success. Brand name should be as recognizable as possible in order to make the company well known. Brand recognition is, probably, main form of intangibles. Think about the many name brand organizations and it will quickly be realized the power of intangible assets. Software programs used by the organizations in order to produce or plan their product are one more brilliant example of intangible resources.

Reputation of the company is rightfully regarded as another very important intangible resource. It is understood that every company strives for having excellent reputation and be second to none in the market. The question of reputation is necessary to draw upon by the management. For instance, the company, having good reputation as a reliable partner and manufacturer of the qualitative products will likely have more customers as the company, having lower reputation even if its production is as qualitative. So, evaluating the performance criteria of the company and speaking about the work of its management, we can say that reputation of the company is very significant anyway.

One more intangible asset considered as important one is goodwill. Goodwill equals the quantity paid to obtain a company in excess of its net assets at reasonable market value. The excess payment may be consequence from the price of the organization’s reputation, setting, consumer list and management team. Goodwill can be recorded only after the purchase of the organization takes as such a transaction provides a purpose measure of goodwill as recognized by the customer. The worth of goodwill is considered by first subtracting the purchased liabilities of the organization from the fair market price of its assets and then subtracting this consequence from the purchase price of the organization. So, goodwill can not be seen at once, it can be evaluated only when the company starts working. Unfortunately, members of the management team and the business board room in a great number of companies all over the world nowadays fail to understand the effect and importance of their intangibles on the bottom line as the intangible resources are not reflected on a balance sheet. People are in habit to believe stable and proved facts that can be seen visually on the paper and from different documents, that is why, intangible assets are not so popular management strategy because they are not provided in writing.  In conditions of modern current economy a lot of companies can make sure their survivability and sustainability into the post depression era if they are able learn to ruin the brick and mortar attitude that has tainted corporate America. According to the statistics, seventy-five percent of value of any company can be traced to intangible resources (Ramu, 2000, p. 15). One main cause for mistake is a lack of understanding and the incapability of upper management to think outside the frames. The representatives of the management within a company having no ability to think outside the frames have the complexity in demonstrating new ideas to upper management in the usage of intangible resources influence.

So why intangible resources are so significant for the company are so important to legitimize management authority? First of all, strong brands effect on consumers’ decision-making processes, as well as making sure that premium prices may be charged. This is mainly true in many businesses connected with consumers. At their best, they symbolize an assurance of excellence and quality and sometimes, when it deals with luxury brands, customers even gain social status from the brand. It can also maintain the fast development of new successful markets. For instance, Tesco, one of the UK’s primary retailers, succeed in penetrating financial services. Surely, the financial benefit of the company arises from intangible resources such as brands and consumer relationships. Intangible resources, therefore, provide with a potential competitive benefit, but being the resources they obviously require specialist management and excellent communication skills. Management’s capability to bring its strategy is extremely dependent on its consumer relationships, brands and performance of main employees – all of which are also intangible resources for accounting purposes. The significance of these factors is obviously very important to a company’s productivity and to the sustainability of future performance of the company. So it will be more correctly to ask how it is possible to improve the management of these resources, rather than ask why it is so important.

One more question of the paper that should be discussed is in what way the companies manage their intangible resources in modern market? Important management is concentrated on the brands to guarantee that the brand is exemplified in every sphere of the company’s outside and interior behaviors (Kaplan and Norton, 2004, p. 24). Brands are continually adapted and revitalized to act in response with variable consumer trends and to be in front of the competition, thus increasing their importance and value. But it is often hard to see financial information about the brand being examined and managed. For instance, the amount of money invested in a brand development is not constantly available.  Consumer relationships comprise one more critical intangible resource for a great number of companies. And, just as in the case with brands, there is a shortage of information about main consumers – including the duration of the relationship, the limits and the charge of supporting main relationships. This is particularly relevant to retailers and the production of customer loyalty card schemes points out the significance these organizations attach to this resource. In the modern market retailers now have better understanding of the desires and needs of their consumers. This information can be further translated into charge which could then be monitored and managed on the continuing basis. The financial result of changes to the way in which consumers are managed could then be frequently reported to the board and eventually to external parties. Everything mentioned above proves once again that intangible resources are extremely necessary to pay attention to and draw upon by the management.

Although there is a widespread opinion that intangible resources are very significant to the future prosperity of any company, still there is a dilemma concerning their ongoing management as well as communicating their value. The fact that it can be rather hard to get the information required to administer and enhance the intangible resources, together with the understanding of this information, has held a lot of companies back. Nevertheless, investors, analysts and stakeholders insist on the importance of intangible resources, from the point of view of their usage and investigating (Grey and Willmott, 2005, p. 45). They come to realize, that there is a significant information gap concerning rational usage and studying of the intangible resources. That is why, the companies should move towards enhanced intangible asset management and improve systems of their usage.  Intangible resources are important for every company despite its size and sphere of business. Not only is there a convincing financial motive for more careful intangible resources management process, the tax and accounting systems are requiring that numbers are billed to intangible resources as part of accounting for attainments. The value of intangible resources is compulsory to be monitored on the constant basis, as it will help the company to improve its performance. Every company has its own intangible resources needed to pay attention to and it is the task of the management to see what asset requires attention and how it van be used to give maximum profits.

Reference List

Berkeley-Thomas A. (2003) Controversies in Management. London: Routledge.

Grey C. (2009) Studying Organizations. ( 2nd ed.) London: Sage.

Grey C. and Willmott H. (eds) (2005) Critical Management Studies: A Reader. Oxford: Oxford University Press.

Kaplan, R. and Norton, K. ( 2004) Strategy Maps: Converting Intangible Assets into Tangible Outcomes. New York: Harvard Business Press

Ramu, S. (2000) International Licensing: Managing Intangible Resources (Response Books). London: Sage Publications Pvt. Ltd

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