Target Cost Management in Automotive Industry

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Associate Professor GRADUATE SCHOOL OF BUSINESS OSAKA CITY UNIVERSITY Sugimoto, Sumiyoshi, Osaka 558 JAPAN TEL +81 6 605 2201 FAX +81 6 605 2200


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Target cost management (TCM) is an innovation of Japanese management accounting system and by common sense has been considered with great interest by practitioners. Nowadays, TCM related dissertations, papers, articles are widely being published in special journals both in North America and Europe; this may explain why seminars and workshops about TCM are so frequent1. Even in the academicians '
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Within this framework, TCM has to be extended to include the whole business strategy. It can no longer be limited only to product strategies. In Toyota for example, management has to think about how to deal with TCM in the fourth technology center. This is what we mean by TCM for strategic technology management. While deciding about the use of core technology for a particular product, the implication on profitability of the product, and other products which can benefit from the same technology must also be estimated. In the case of investment decision for a particular product, the evaluation should

not be limited to that product, but has to take into account other products that can benefit the investment. This shows the importance to think about R&D TCM and technology focused TCM7. 3. Manufacturing Focused Target Cost Management: Linkage Between Cost Maintenance and Kaizen Cost Management It is believed that target costing activities are mainly carried out at the concept and development stage of a product. This belief is based on the assumption that about 80 percent of costs for a particular product is locked before the beginning of production stage. Even after all TCM related activities are effectively done during the concept and development stage, this does not assure that once the production begins, costs will remain as predicted. Therefore, the effectiveness of TCM depends on the effective linkage between cost
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