Assessing the Impact of Intangibles in the Performance of Pharmaceutical Firms

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Introduction

The intense competition in the pharmaceutical industry has demanded firms to undergo massive makeovers. Most businesses have implemented conventional and unconventional shifts to remain competitive. The most common shifts manifested by firms involved their assets. In particular, pharmaceutical firms have increased their focus on managing intangible assets. Leadership skills, marketing style, and business approaches have evolved to improve company performance. Intangible assets are continuously upgraded to meet the requirements in the ever-changing industry.

The existence of intangible assets in firms has remained a certainty in drug manufacturers. These firms have devoted huge portions of their budget to improve these properties. An intangible asset is considered a company attribute that has no physical state. Intangible assets are classified as definite and indefinite. Unlike physical assets, intangibles are difficult to value. But the contributions of intangibles to operations and revenues are evident. Moreover, intangible assets are used to improve the minimal detail in pharmaceutical firms.

A definite intangible asset is considered temporary and expires given a fixed term. An intangible asset classified as indefinite stays with the company for undetermined periods. Cohen (2005) has indicated that intangible assets are valuable components of organizations. The contribution of intangible assets is crucial to the success of the firms. Intangible assets have to be properly evaluated to realize immediate benefits and long-term advantages. The valuation process is important in ascertaining the effect of intangibles on drug makers.

Statement of the Problem

The study will mainly discuss the effects of intangible assets in pharmaceutical firms. The discussion will revolve around the manner in which the use of intangible assets is used. The impact of intangible assets in making business decisions is important. The evolution of intangible assets in the pharmaceutical industry is an interesting point of discussion. Most drugmakers are operating in a worldwide scope. This coverage is also perceived as an aspect that affects the treatment made to intangible assets.

The research will tackle the methods in revolutionizing intangible assets. Although these types of assets are never seen materially, the benefits these assets provide are critical. To promote sound international business processes, intangible assets have to be accorded with sufficient roles. Basically, these assets serve as the glue in organizations. Indeed, intangible assets have to be properly appraised, ascertained and used to ensure that other aspects of the business are maintained. More so, the value that intangible assets provide determines the success of the international business.

The study will examine the actions of pharmaceutical firms regarding the need to improve the use of intangible assets. Firms that operate abroad have to consider the outcome of changes in the treatment of intangible assets to the overall wellness of organizations. The trends in the environment will be aligned to the various schemes that firms implement to further exploit intangible assets for the benefit of the organization. In addition, the existence of economic barriers can stall the growth of intangible assets.

The following questions will serve as a guide in the next discussions: 1) how do pharmaceutical firms value their intangible assets; 2) is the exploitation of intangible assets part of the overall business strategy of drug makers; 3) do pharmaceutical firms consider expansion of their intangible assets; 4) how do drug manufacturers firms add value to their intangible firms; 5) is distinctive competitiveness part of the development of intangible assets; 6) how does management affect the benefits provided by the intangible assets; 7) are their aspects and circumstances that stall the development of intangible assets; 8) what do firms maintain in mitigating the damaging effects of economic uncertainties that pertain to intangible assets.

Background of the Study

Basic modifications are occurring in the nature of the private firms in response to the threats and opportunities of the global markets. Even companies dedicated to domestic business increase geographic reach since suppliers and customers are, located in other parts of the world. As the intensity of global competition rises, many companies are forced to re-evaluate their niche in the world market. For some companies, this entails strengthening their domestic position against competing for foreign products. Other firms respond by aggressively expanding their operations into foreign markets.

Collaborative agreements with other businesses are an effective alternative to the more traditional approaches. Part of these changes concerns the assets of firms. In particular, intangible assets are rigorously used to ensure that products remain competitive and the reputation of international firms continues to soar. The methods of using intangible assets are consistently changed increase market flexibility and adaptability.

Businesses in the pharmaceutical industry have been using intangible assets to facilitate activities and ensure that the tangible assets are efficiently used. Optimization of intangible assets is relevant to international firms. These companies are poised to exploit their intangible assets. The detailed study of these assets aims to produce company benefits. Assets such as leadership skills, research and development, marketing schemes, and strategic planning are all created to balance the activities of international businesses.

Drug manufacturers that operate globally focus on five dimensions that include: expansions of operations overseas, import-export activities, comparative management, comparative economic systems, and functional business analysis. It is important to understand that all these dimensions require intangible assets to be materialized. The policies formulated by firms and the methods used to manifest these dimensions are part of the whole intangible asset sphere. Methods do vary and often reflect the main purpose of firms. It is imperative that international companies function with effectiveness and efficiency.

There are several benefits attributed to the use of intangible assets and similar properties (Bounfour, 2003). Intangible assets are instrumental in the growth of the service sector that contributes the most to the Gross National Product (GDP) economies. The dematerialization of manufacturing activities was made possible through the schemes developed by international firms. Moreover, industrialization in most industries has required emphasis on marketing plans, product diversifications, and other improvements. Most companies have problems reconciling the values of their assets indicated in their books and by the market. In addition, recent studies have revealed that intangible assets play vital roles in most companies that are gearing towards competition.

Research and development, brand reputation, and innovation processes have improved immensely in the manufacturing sector (Denenkamp, 1995). Some aspects have to be used to further enhance the products. Pharmaceutical firms use intangible assets to improve the standing of the goods in the global market. Manufacturing firms have been extracting the benefits of intangible assets and weigh the impact of such aspects on the overall wellness of the organizations after the outcomes have been realized.

Purpose of the Study

Critics have been complaining about the lack of importance provided to intangible assets. Despite the benefits provided by these unseen aspects, research proponents have forgotten the benefits that intangible assets give. This research was conceived to further explore the nature of intangible assets and the manner of their use in some firms. The above discussion reveals that intangible assets are being exploited and improperly used. Although drug makers mirror efficiency in doing business processes, exploitation of intangible assets has been viewed as a second priority to these companies.

Significance of the Study

The research is principally designed to look into the complex processes in pharmaceutical firms and explore the potentials of the industry. The study focuses on the value of intangible assets and the manner in which these assets are exploited by drug makers. The research is an important step towards formulating quality business models and theories regarding intangible assets. Businesses have emphasized more on intangible assets as catalysts and required supplements to tangible assets. Through this study, the manners of evaluating and using intangible assets in the international arena will be greatly improved.

The study concentrates on the various international business entities within and outside organizations. Drugmakers with varying methods in using intangible assets have to consider employing universal schemes. Competition, however, suggests otherwise that pharmaceutical firms have to set aside differences. The important components of organizations have to do their part inefficiently using intangible assets. Exploitation has negative connotations; hence, businesses have to change such distinctions. Other entities such as the government, the financial markets, and the consumers have to do something to influence firms in effectively maintaining intangible assets.

This paper seeks to aid other studies related to the exploitation of intangible resources and suggesting measures to enhance future studies. There are upsides of intangible assets that international businesses have to recognize. Intangible assets are abundant. The deployment of intangible assets is possible even providing various uses. Intangible assets increase in value with increased usage. This capability is referred to as scalability describing the direct relationship of intangible assets usage and value. Non-physical assets have no diminishing attributes. The networking effects of intangible assets are immense. Firms that rely on intangible assets observe the formation of the important network core. Moreover, intangible assets are designed to create future value. The nature of intangible assets suggests that benefits are expected in the long term.

Scope and Limitations

The pharmaceutical industry occupies wide spheres and includes some of the biggest firms in the world. The focus of the study is on drug makers with extensive global market coverage. Drug manufacturing has been viewed as a breeding ground of intangible assets and organizational change. Drug firms have a wide range of intangible assets that the research can possibly explore. But the study attempts to limit the number of firms to be included in the study. This will be done to provide more focus on established companies in the industry.

The priority of the study will be placed on the intangible assets of companies. The research will highlight traditional and evolved schemes of exploiting and using intangible assets. In the pharmaceutical industry, companies have several intangible assets that are used in production, distribution, selling, and other activities. The study emphasizes the extent to which manufacturing companies exploit intangible resources to improve corporate standings. The research will strictly implement a consistent method to provide comprehensive and credible results.

Rationale of the Study

In the knowledge economy, the real worth of a company is based on assets that economists have not always known how to measure – intangible assets. These are the assets upon which companies build sustainable competitive advantage. Consider the case of Microsoft. In 2000, the company reported assets of $52 billion and revenues of almost $23 billion, but its market capitalization was more than $423 billion. The difference between tangible and intangible value was an incredible 464% mark up (Wagner, 2001). With the globalization of economies, internalization has become a trend among companies. In this kind of environment, effective management of intangible assets is a critical success determinant.

Research Methodology

In this section, research methods to be used in the study will be presented and discussed. The research methodology serves as the backbone of the study. Primarily the research methodology will serve as a guide in providing a sound framework to the study. The methodology will comprehensively discuss the research philosophy, research approach, research strategy, and the methods of data gathering including all mechanisms involved. It is necessary to view these aspects in both technical and theoretical sense. The success of the study greatly depends on how all procedure is carried.

Research Philosophy

There are three reasons that lead researchers to the exploration of research philosophy. These accordingly play significant roles in guiding the entire research methodology. First, establishing the research philosophy can aid the researcher in refining and specifying the research methods to be used in a study. This is actually essential in defining the overall strategy to be used in the research. Second, the research philosophy enables and assists the researcher in evaluating different methodologies and methods. This is undertaken to avoid inappropriate use of instruments and unnecessary procedures through the identification of the limitations (Easterby-Smith, et al., 1997).

The ideal research philosophy in this study has to grasp all dimensions of reality pertaining to the subject. Although specific areas have to be thoroughly discussed, it is highly beneficial to determine the impact of all aspects that are related to the subject. The researcher becomes an objective analyst, providing detached interpretations about those data that have been collected in an apparently value-free manner. In addition, the emphasis is on a highly structured methodology to facilitate replication and on quantifiable observations that lend themselves to statistical analysis. In this process, the assumption is that the researcher is independent and will never be affected by the subject and in the same manner never affect the subject.

Research Approach

This study will approach data gathering using the multi-method strategy that includes both qualitative and quantitative approaches. The quantitative approach pursues facts and is employed when researchers desire to acquire statistical truth; while the qualitative approach recognizes the focal importance of the researchers’ viewpoint and is used when researchers want to observe in detail their own research viewpoint. Qualitative research assumes that individuals construct reality in the form of meanings and interpretations and that these constructions tend to be transitory and situational. This point is highly applicable in the method of research that will be done.

As the objectives of the research suggest, the study information retrieved will be analyzed quantitatively and qualitatively. Quantitative research is a paradigm based on positivism which takes scientific explanation to be nomothetic (Schurink, 1998). Its main aims are to objectively measure the social world, test hypotheses, and predict and control human behavior. Moreover, quantitative research is an endless pursuit of facts with the desire to obtain statistical trends. The use of quantitative research is one of the best manners of finding exact facts. The goal of the method of research is to gain universal value. This universal value remains applicable regardless of changes in time, events, places, and circumstances.

The extensive use of the quantitative research approach is aimed at the objective determination of facts. There are instances when quantitative research is value-free and the use of statistical tools reduces the ambiguities and contradictions that are expected as the research progresses. As observed in several works of literature, the quantitative methodology and its requirements almost became the only accepted methodology even to the level of an ideology.

In some discussions, it often seems as if statistics and hypothesis testing dictated the research process than the research problem and the phenomenon being researched. Such an approach quite often led to the quantification of man. Respondents, thus, become mere numbers. The research appeared to become equivalent to a mechanical implementation of a measurement instrument and statistical testing. The question arises whether it is acceptable to equate statistically significant results to a substantial contribution to the body of results.

Although the qualitative method is extensively in academic researches, several changes and modifications have made the method highly flexible. This means that any subjectivities and value judgments on the part of the researcher are separated from the research. The other advantages of qualitative research include: the method is universal; it consists of axiomatic principles that consider the theory to be value-free; and mathematical-statistical analysis reduces ambiguities and contradictions, making the research possible to be generalized.

As for the qualitative research approach, one of the major benefits is that it highlights the researcher’s viewpoint in the research process as well as on its results (Popkewitz, 1984). Moreover, the qualitative research approach can explain the psychological dimensions of human beings which are impossible to represent numerically in the quantitative approach. Another benefit of the qualitative research approach is that the research can be expressed comprehensively through verbal analysis of human behavior. The qualitative research approach is limited by the nature that the researcher controls the research. This means that the approach emphasizes the researcher’s decision in both the research design and the analysis of the data.

No single research method is inherently superior to any other all methods have their relative advantages and disadvantages. Instead of clashing one approach against another, it is more fruitful to follow a strategy of integrating these methods. The primary benefit is that using such an approach results in pluralism which can occur in an integrative way. This closes the gap between the quantitative and the qualitative approaches. A variety of research methods can be combined within this approach, where, for instance, researchers may collect both qualitative and quantitative data from the same participants to provide different perspectives on the study’s research questions.

Research Method

The research is a multi-stage study that involves several procedures that will allow the research to fully grasp the demands of the study. The second stage is related to the development of a framework that serves as the guide in the conduct of the research. The framework, illustrates both the dependent and independent variables are that present in the study. The dependent variable pertains to the results of the study attributed to the information. The independent variables are the data gathered by the researcher. The data needed comes from survey results, primary works of literature, and other forms of relevant documentation.

The second stage is developing the parameters of the survey. Although surveys are usually self-manifested, the method to be used in this research is different. Because of the study’s diversity, several methods will be used to obtain the needed information. The immediate targets of the study are executives that have worked or working for pharmaceutical firms. Communicating with these respondents is a challenge. But such is needed to provide a clear perspective of the topic being discussed.

The third stage deals with the communication with the target respondents of the study. Before the actual research is conducted, the researcher has to inform the target respondents of the nature of the survey. From there, the researcher can obtain confirmation coming from the respondents. Also, the researcher will do follow-up communications to ensure the participation of the respondents. Usually, this is done through phone calls and electronic mails. It is also viable for the researcher to conduct house visits when the mentioned alternatives are unavailable.

The fourth stage is considered as the main component of the data gathering process. Conducting the survey provides several effective approaches. Initially, the researcher will conduct the survey according to the availability of the respondents. Although this will entail more time, the process can be shortened through successive surveys. The cooperation of the respondents is highly valued in this process. After the survey is done, the researcher randomly selects respondents to participate in the discussion. It has to be noted that this process is also subject to the availability of the respondents. Such has to be determined prior to the conduct of the research.

The conduct of the survey will be self-administered which means that the respondents will directly answer the questionnaire provided. The researcher, however, will provide ample assistance to guide the respondents on answering the question. It will be difficult for the researcher once some of the questionnaires are invalidated. When such an event occurs, the researcher will be deprived of acquiring complete information based on the number of respondents. It is important to emphasize the tendency of the agent to rush through the details. In this situation, the anticipation of the researcher is highly required.

After all surveys and interviews have been completed, the researcher will oversee the results of the study. First, the researcher needs to categorize the data into the results taken from the stakeholders. Then the research can start examining the validity of the survey results. Some possibilities result that lack in substance will be encountered. It is imperative for the researcher to have a keen judgment that will efficiently help in identifying the results that need to be invalidated. Invalid survey questionnaires will be removed from the entire data. This is done to avoid this incomplete information to influence the results.

The second part of the study pertains to the understanding of intangible assets as valued by firms.

Gathering of Secondary Information

The information gathered from the survey is still far from completing the needed sets of information. The researcher has to reinforce the survey results with other data. The most effective source that can aid the researcher in the library. In this sense, however, the library pertains to the source of recorded information and documented findings. Providing these forms of data will improve the analysis which will be conducted in the next stage of the research. There are several; kinds of data that the researcher can use. Based on the requirements of the research, the research will focus on two basic sources of information.

First, secondary data will be collected from books, journals, articles, and other valued documents. Library research is traditional and the use of internet instruments is often suggested. Usually, the internet provides unlimited information regarding the subject being studied. Data gathering is critical because the bulk of the discussions will be based on the information extracted. Without sufficient information, it will be difficult to produce quality results and formulate accurate conclusions. Second, secondary information is also vital and serves as the support for the primary data. Secondary data are taken in the same manner as primary information is extracted.

The research aims to secure the necessary information and to implement the required methods in conducting studies. Indeed, there are observations that the schemes of research are patterned after other successful studies. The effectiveness of those researches will make the entire process successful. The availability of the information is critical in the entire research process.

Although the information is readily available, the gathered data are still analyzed before being used. Some information appears to be useful but lacks the proper documentation and credibility. The gathered data is removed from the study. The completeness of information has to be stressed. Despite the barriers to research, there are several avenues that can be used to make all necessary information present in the table before the study is conducted.

Database of the Study

Most of the secondary data will come from the following journals: International Business Review, International Journal of Business Studies, International Journal of the Economics of Business, International Journal of the Economics of Business, and Research in International Business and Finance. Journal articles that discuss and examine intangible assets as used in international business will also be used. Online databases, such as Proquest, ScienceDirect Elsevier Science Journal, Emerald Journals, Expanded Academic ASAP, and Questia will be consulted for materials and references.

Validity of Data

This research will use a multi-methods strategy in gathering and analyzing data. The strength of this method is that, on the one hand, transferability will be achieved. On the other hand, qualitative analysis will enable the researcher to examine interpersonal, social, and cultural contexts of international business. Credibility will be ensured through prolonged engagement, triangulation, and member checks. Dependability will be met through referential adequacy, member checks, and experts in qualitative analysis.

Originality and Limitations of Data

The data to be gathered is original in that the viewpoints of not only managers from international businesses will be covered, but also the views of managers from local businesses with respect to the utilization of intangible assets. This will highlight how internationalization affects the use of intangible assets. The major limitation of the data is that the researcher will not attempt to achieve a representative sample due to time and financial constraints. The problem is that it can be hard to get over to people that a single- or double-figure sample is valid. A common misunderstanding is that, if the sample size is increased, the results should be statistically reliable.

Chapter Overview

The research will provide information on the developments of intangible assets evident in some of the established pharmaceutical firms. This study will be providing a guide on the importance of intangible assets. The research will highlight the importance of intangible assets in product development.

References

Bounfour, A., (2003), The Management of Intangibles: The Organisation’s Most Valuable Assets, London: Routledge.

Cohen, Jeffrey. (2005). Intangible Assets: Valuation and Economic Valuation. USA: John Wiley and Sons.

Denekamp, J., (1995), Journal of International Business,”Intangible Assets, Internationalisation, and Foreign Direct Investments in Manufacturing,” Pp. 493-502.

Easterby-Smith M. et al, (1997), Management Research: An Introduction, London: Sage.

Popkewitz, T., (1984), Paradigm and Ideology in Educational Research, Lewes: Falmer Press.

Schurink, E.M., (1998), Research at Grassroots: A Primer for the Caring Professions, “Deciding to Use a Qualitative Research”.

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