04. What is target costing?
Definition: "Target costing is the system to support the cost reduction process in the developing and designing phase of an entirely new model, a full model change or minor model change" (Monden, 1991)
4.1 Impact of target costing to customers
4.1.1 The customer sophistication determines how good customers are at detecting differences between the quality, price and functionality of competitive products. Sophisticated customers are highly educated about the product offerings and can detect minor differences, and will freely switch between manufacturers to buy the products that best satisfy their needs.
For example in Toyota, the primary characteristic of the survival is differentiating the products as functional.
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For example, the market is sampled when the product is first conceptualized, just before it enters the product design stage, and just before it enters the production stage. The primary purpose of these market revisits is to capture how the position of survival zones has changed since the last survey. The product’s design is then modified where possible to increase its probability of success.
4.1.3 The degree to which customers understand their future product requirements
As the degree of understanding increases, it's become more beneficial to relied customer preferences to determine the future location of survival zone. When customers have little understanding Toyota has had paid too much attention to customer risk launching products that fail because they are outside their survival zones. For example, Toyota's customers can be relied upon to tell the firm what need to be improved in their designs and to a certain extent by how much. In such an environment, target costing will offer considerable benefits because the customer is able to specify quite accurately the location of future survival zones. (Cooper,
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Major variations are achieved via the introduction of different product model (Toyota Corolla Versus Camry)
4.2.2 Frequency of Redesign
Rapid introduction of new products with each new generation incorporating the latest technology and hence providing increased functionality. In all of the firms, product development times have been reduced to enable more frequent product introduction to occur. Thus, intense competition has forced the firm to become an expert at developing and launching products at a rapid rate. However, this ability has a downside.
a. The duration of the manufacturing phase is short, therefore the time available to generate an adequate return on the up-front investment is limited and it leads to lower sales volumes of each product. To remain profitable, the firm must launch a high percentage of profitable as opposed to unprofitable products.
b. Due to the short product life cycles, there is inadequate time to correct any errors. If an unprofitable product is launched, it will often remain unprofitable until it is withdrawn. Therefore, it becomes critical to design new products so that they are profitable.
4.2.3 Degree of
Target must compete vigorously and fairly in the marketplace using our independent judgment to make the best decisions for the Company.
After several new product failures, the company began using customer input to help develop new products. In 1989, the fishing electronics industry is experiencing a downturn, and the company's sales and profits are slipping. The company, which has one product line (depth sounders) and a strong brand (Hummingbird), has conducted substantial market research on three new products. These products are project 901, hummingbird VHF Radio, Locator/ GPS navigator. Of these, project 901 is an extension of the depth sounder product, while the other two would be new product lines for the company. Top management is deciding which one or more of the three new products it should proceed with. In this paper, I will discuss the positive and negative aspects of each product ideas and my recommendations to Techsonic management
...design are lower than other competitor’s. For example, they have ultra fast computing power but our brand just has high speed computing power. Thence, some competitors which Workhorse chose their product are just they want and need.
Adopting a strategy of differentiation makes firms provide products and services what are distinct in some way valued by customers.
More new products need to be introduced and research needs to be done to find out which products will be most popular and profitable.
Chapter 6 covers the “product life cycle”. Product life cycle is series of stages a product goes through from the time it is launched into the market until the time it is removed from the market. Cactus Rose is currently in the stage of growth. Since, Cactus Rose has been around the town of Wilton for just a couple of years, it is considered as one of the best fine dining area around town. The restaurant can still can be enhanced and promoted and gaining the people around town’s full support. Eventually, it will reach its full marketing potential in the near
For instance, Primark 's products offer customers clothing as a base product, of witch actual benefits are being to be cheap and trendy, and they may have some return policy as augmented benefit in case of defects. Each product may be realised following a new product development process to improve its success rate (Harris and Schaefer, 2015, p.43-47).
Target is also working consistently to find alternative methods for fuel such as natural gas (Corporate Responsibility Report, 2014). The fourth part is selling and staying in line with their famous tagline, "Expect More. Pay Less." This means that target is constantly looking for ways to lower costs and meet guest standards when they hear that tagline (Corporate Responsibility Report,
To conclude, these issues are holding back the firm from being able to sustain profitability to a great extent. If these are resolved, then it can help the firm to form an overall profitability as each of its subsidiaries will contribute to be profitable by functioning only in the packaging sector or exploring new markets.
In the modern world of conducting business, any company that wishes to succeed must differentiate its products or services from others in the industry. Differentiation makes it possible for consumers to point out notable differences between one company’s products as compared to those of competitors. Differentiation helps companies build brand loyalty as the uniqueness keeps customers fixed on a particular product. BMW is one of the most popular automakers in the world today. It definitely uses differentiation as a strategy to beat off competition by building products that are innovative, detailed and incomparable to those of competitors.
Where there is rapid growth comes increased competition; similarities in products across manufacturers have reduced brand differentiation across the board. The problem now is the severe rise of copycat companies and manufacturers that copy designs and specifications of cars, and proceed to undercut the original manufacturer’s profit margins. So to improve their brand standing, every manufacturer’s individually have resort...
A Product Life Cycle can vary due to various marketplace product or service offerings. Maturity length of time may vary because the end consumer was not prepared to accept the new offerings. Faster maturity breakthroughs can be a direct result of certain production service breakthroughs that usually get accepted quite quickly. Decline of a product or service can be the result of a customer interest and then disinterest. When a product or service does not extend its growth, it can be because the product or service has lost its usefulness. In conclusion, The Product Life Cycle can be used as a marketers planning tool to create portfolio planning, strategy formations, as well as future forecasting. One must never to marketplace, and competition. (Fortenberry, J. L.,
Toyota’s uses both differentiation and low cost as generic strategies to try and gain a competitive advantage over their competitors in the automotive industry. The market scope that Toyota uses is a broad one that encompasses nearly every type of customer that is in the market to purchase an automobile. Toyota is able to target such a large market because they have something for everyone. Toyota has four wheel drive trucks and SUVs for the outdoor types or those who live in areas that face severe weather conditions, hybrid models like the Prius for the eco-friendly customers that are interested in saving the environment, along with the standard cars for general, everyday use. Additionally, Toyota provides vehicles for all price ranges.
Activity-based costing (ABC) is a costing method that is designed to provide managers with cost information for strategic and other decisions that potentially affect capacity and therefore “fixed” as well as variable costs. Activity-based costing is mostly used for internal decision making and managing activities while traditional costing method is used to provide data for external financial reports. Most organization uses activity-based costing as an addition system for using traditional absorption costing as sometimes the traditional cost system misleads the product’s profitability. In a company, there are many products on sale, if one product is sold at a high price with low product margin and a product with high product margin at a low price, it may result in a loss. In addition, due to the reason that cost drivers and enterprises business may change, activity-based costing analysis also needs to be revised periodically. This amendment should be prompted to change pricing, product, customer focus and market share strategy to improve corporate profitability.
Toyota offers for sale a full line of cars, from family and sportive ones, to minivans and trucks. The product mix of Toyota consists of sedans, coupes, hybrids, vans, SUVs and trucks. The width of Toyota’s product mix is quite substantial. Product line length is a number of different models in a product mix: Prius, Avalon, Corolla, Camry, Lexus, RAV4, Land Cruiser, Tacoma, Tundra, Scion and others. An example of a depth of Toyota’s product mix could be the possible variants of Lexus model (ES300, ES 350, IS Series).