Advanced studies in

business
Lecture Four

Dr/ Hend Awad Mahmoud

 Lecture Four

Reference (1): The Management of

Intangibles
Chapter Eight:

Outsourcing of intangibles
 Topic one: outsourcing of intangibles

This concept will be discussed from four point of views are,

1. The analytical approach

2. The strategic approach
3. The functional approach
4. Theoretical approach
 (A) Analytical approach

❑ intangible investment covers all long-term expenses. For

example, expenditure on R&D and the acquisition of
technology, training, labor relations, managerial structures, the
development of technological and business relations with
other enterprises, suppliers and customers, marketing, and
software expenses.

This approach is divided into five main categories are,

1. Investment in technology. This is intended to develop the
base of knowledge of the organization and its objective, it
requires the introduction of new products and processes on the
market through the acquisition of technologies.

2. Software. This is intended to develop the software programs

within the organization to perform all activities.

3. Enabling investments. This group includes the investments in

human resources, organization, and structuring of information.

4. Information systems. This group includes the information

systems developed by enterprises for their internal use.
 5. Investment in market information resources. These are the
most important investments of the organization. These investments
allow the final users to be better informed of the characteristics
of the enterprise’ s products and services.

These categorizes are summarized in the following diagram,

Figure (1): categories of the analytical approach
 (B) A strategic approach

Under this approach, the intangible are studied from the basis of
the competitive advantage.
❑ Competencies refer to the capability of a combination of
resources to carry out certain tasks or activities. Resources
therefore appear as the basic components of the competencies.

❑ Competencies are the main sources of the firm’ s competitive

advantage. Competencies include R&D, production, distribution,
finance, etc.. Most important at this level is the firm’ s ability
to integrate individual competencies to gain the competitive
advantage from it.
 (C) A functional approach

❑ The functional approach comes under a strategic perspective.

Under this approach the resource allocation process is
organized.

❑ It is divided into two types of functions are, value-functions

and resource-functions;
❑ The value-functions include logistics in the broad sense,
including information logistics, processing, storage and
transmission of information.

❑ The resource-functions concern three types of resources:

informational resources that including technology, human
resources, and financial resources.
 (D) A theoretical approach

❑ Depending on the external sources for carrying out intangible

activities, especially the mostly professional services. This
approach has the following advantages.

1. focusing on the core business;

2. Reducing the technological complexity
3. reducing costs of performing activities
4. developing new competitive approaches, and innovation.
Reasons of the outsourcing of intangibles

1. the freeing up of the management time.

3. the possibility to reduce investments in the physical assets
and staff.
4. the possibility to transfer activities for which there is a strong
resistance to change.
5. the need to facilitate access to more efficient technology.
6. the need to facilitate the introduction of new applications.
7. the possibility to convert fixed costs into variable costs.
Examples of the outsourcing of intangibles
 Research point

According to your point of view, explain which is

more beneficial for the organization the internal
management of intangibles or outsourcing of
intangibles? Why?