1. Evaluate Olympus’ current strategy.
Olympus’ current strategy is three-fold:
• Recapture market share by introducing new products. This is implemented mainly through Olympus’ extensive product planning process whereby enormous information regarding future mix of business, current and new technological development, business environment analysis, export, domestic market and industry statistics, consumer preferences, future lifestyle change, and competitive analysis is gathered, reviewed and incorporated.
• Improve product quality. Olympus’ quality improvement program focuses on both the introduction of new products and the manufacturing process in general. This strategy is intertwined with the other two strategies in that high product quality enhances customers’ trust and confidence in Olympus’ products, hence helping it recapture market share. At the same time, improved product quality enables it to reduce production costs through decreased disruptions to the production flow.
• Reducing production costs. Olympus adopts and implements a comprehensive and aggressive cost-reduction program. Its target costing system enables it to design high-quality products at low cost; it employs multiple programs to reduce unnecessary expenditures in production costs, costs of defects, capacity utilization costs and overhead expenses; it improves on product engineering to shorten production lead time and decrease inventory; it applies innovative production technology to optimize manufacturing processes; it shifts some manufacturing activities overseas to further reduce materials, labour and other costs; last but not least, it divides production process into autonomous groups and holds these groups re...
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...he continuous improvement and operational control are also used to further reduce costs. However, the functionality reduction during the process will adversely affect the differentiation strategy as what we mentioned earlier.
4. What changes would you make to the firm’s current target costing system and strategy?
The main thing that come to mind is the fact that the company sets a cost target right at the beginning of the process. If the research is right, then this process may be successful in keeping cost below the target, but in cases where they have overestimated the Target cost, it would result in them spending more money than they actually needing to. I think there should be a mechanism built in to re-evaluate the target cost thru the process, so as to find more savings if available. This could also eliminate some erroneous estimates made on low cost as well.
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