Essay about Mercedes-Benze- All Activity Vehicle

783 Words May 15th, 2012 4 Pages

a) What is the competitive environment faced by MB as it considers launching the AAV?
The competitive environment was that the company faced difficulty in controlling costs, material purchasing, and a fast changing market. The needs of the customer were changing and MB was facing monetary losses. With regards to the AAV market this was targeted at a segment that was expanding, the sports utility segment. Jeep, Fordand GM dominated this.
Reinforce that Mercedes is a company that had never lost money. They simply built the best car their engineers could design and priced it above cost. Demand often exceeded supply. As a result, cost had never been a primary consideration. Changes include: cost
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d) How does MB approach cost reduction to achieve target costs?
At Mercedes, reducing the cost of each function group was accomplished by reducing costs of various components that make up the function group. Stress the importance of this approach over an “across-the-board" cut.
MB approaches cost reduction by first ascertaining through the suppliers and designers to estimate the percentage of total cost for each function group. The basis of cost reduction was that the customer group rated the importance of each of these functions and then the target cost was modified to meet customer expectations. The basis of MB's cost reduction was to use a modular construction process. First tier suppliers provided the systems; this gave the company bargaining power with its suppliers.

e) How do suppliers factor into the target costing process? Why are they so critically important to the success of the MB AAV?
The product and manufacturing costs can remain close to the projections or can change dramatically depending on the suppliers. Most importantly, cost reduction targets had been set for every function group like doors, sidewall and roof, electrical system, bumpers and soon. If the suppliers did not cooperate and did not supply high value-added systems then the entire project of AAV would falter. MB expected that the suppliers would meet their cost targets. This is why their role is so important.
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