Target Costing in Swedish Firms – Fiction, fad or fact? “An Empirical study of some Swedish firms”.

Abstract

Today’s fast changing business environment makes urgent necessity of product innovation and strategic management awareness, keys to companies’ competitiveness, long-term strategy implementation and survival. Firms can no longer produce and market huge amounts of standard products with a relatively stable market and technological climate. The business management has to grapple with unstable, rapidly changing markets and technologies in order to run their organisations and be able to sell products. To implement market - driven management policies across the organisation, measurement and cost control systems must be designed to motivate the desired consumer –oriented behaviour. Thus strategies that determine the direction of product innovation have become more crucial to corporate management today than ever before. In this situation therefore, target – costing system (Japanese) has been identified as the system which will help managers push forward this badly needed strategy. The increasing popularity of the system as opposed to “cost plus” (Western), has influenced my study in this thesis. Therefore contained herein is a study to examine whether Swedish firms are adopting target costing as their management practice. In the study, 41 companies are contacted and 16 indicate that they use similar systems. Use of the system is high among manufacturers and cost reduction is among their main motive for adopting the system. Crossfunctional application and design/product conception departments are the leaders in driving the system.