target costing toyota case study

Tanaka, T. 1993. Target Costing at Toyota. Journal of Cost Management (Spring): 4-11.

Summary by David Alvarez Master of Accountancy Program University of South Florida, Fall 2001 Japanese Management Main Page | Target Costing Main Page

“Major differences seem to exist between what Western and Japanese manufacturing executives expect from cost information and how they use it. A manager in Europe or the United States generally expects to use cost information to make decisions about pricing and investments, while a Japanese manager expects to use cost information to control costs.”

There are numerous differences between management practices in Western companies and companies in Japan. One of the main differences is related to cost reduction. Toyota uses cost planning to generally reduce costs at the design stage. By using this technique, Toyota sets goals for cost reduction, and then tries to achieve these new targets through design changes that will accomplish the cost reduction goal. Toyota goes through a vigorous testing phase to judge the costs of the new design in comparison with the old one, in order to guarantee a cost reduction after implementation of the new technique. This is the main idea that Toyota uses to achieve their company wide goals.

The question still is, what is target costing? Target costing is an attempt at the planning and development phase of a product life cycle, to attain a specified cost that is decided on by management. This technique is different from cost elimination in that it seeks to lower costs by designing a quality product that reduces costs in the production phase.

Product Planning

This article focuses on the changes made to existing automobiles and not the design of new ones. There are several steps in the sequence of price, production, and cost decisions. Toyota first decides what the new retail price of the automobile is going to be by taking the old price and adding the value of any new functions. The sales division comes up with the suggested production volume, by taking past numbers and indexing them to market trends and the state of competitors. After all these figures have been set, the focus switches to cost planning. This cost plan is based on the product plan and the targets for retail price and production volume. Toyota establishes a profit target that is subtracted to determine their target cost. These cost planning decisions are made three years before they release the model.

Tanaka includes the algebraic explanations of how the cost-planning numbers are derived. However, they are not inherently important to the summary of this article.

Estimating Differential Costs

When Toyota estimates the approximate costs of a new model it does not simply add up all the costs of the upgraded model, but instead it sums the cost variations of the new model and the old one. Toyota finds this technique to be very beneficial, because it tends to be less work and provides more accurate results. In addition it helps the specific divisions comprehend the cost fluctuations. By using this technique Toyota removes variable costs both models incur, such as wages and indirect costs, and then they can base their decisions only on costs that change between the two models in relation to design and production volume.

Promoting Cost Planning

“The purpose of cost planning is to determine the amount by which costs can be reduced through better design of the new model.” Cost reduction targets are not rationed off to the appropriate divisions by using a standard percentage to spread the reduction evenly over the entire process, but instead the reduction is efficiently passed to each division based on their capability. This capability is determined by the cost manager meeting with each division manager to agree on an appropriate cost reduction for that specific division, and then it is the responsibility of each division to carryout those reductions their own way.

The main point in this article is to show how cost planning at Toyota is focused on the design phase. Toyota does this by setting goals for cost reductions through design changes solely, excluding all other factors. Toyota takes these goals and then assesses them to different divisions, to make the necessary changes. Toyota believes that by changing product design and production design to produce lower priced and more efficient products, they will achieve a higher level of profitability.

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Related summaries :

Berliner, C., and J. A. Brimson, eds. 1988. Cost Management for Today's Advanced Manufacturing: The CAMI Conceptual Design. Boston: Harvard Business School Press. ( Short Summary or Concepts .) ( Longer Summary .)

Cokins, G. 2002. Integrating target costing and ABC. Journal of Cost Management (July/August): 13-22. ( Summary ).

Dummer, W., M. Masters and D. Swenson. 2015. Delivering customer value through value analysis. Cost Management (March/April): 17-24. ( Summary ).

Hiromoto, T. 1988. Another hidden edge: Japanese management accounting. Harvard Business Review (July-August): 22-25. ( Summary ).

Monden, Y. and J. Lee. 1993. How a Japanese auto maker reduces costs. Management Accounting (August): 22-26. ( Summary ).

Sakurai, M. 1989. Target costing and how to use it. Journal of Cost Management (Summer): 39-50. ( Summary ).

Schmelze, G., R. Geier and T. E. Buttross. 1996. Target costing at ITT Automotive. Management Accounting (December): 26-30. ( Summary ).

Tanaka, T. 1994. Kaizen budgeting: Toyota's cost-control system under TQC. Journal of Cost Management (Fall): 56-62. ( Summary ).

Yu-Lee, R. T. 2002. Target costing: What you see is not what you get. Journal of Cost Management (July/August): 23-28. ( Summary ).

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Toyota Motor Corporation: Target Costing System

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Toyota Motor Corporation starts as a subsidiary of the Toyoda Automatic Loom Works, Ltd. In 1993, Toyota Motor Corporation was Japan's largest automobile company. Many major manufacturers in Japan use target costing, the system used at Toyota Motor Corporation is the oldest and considered by many the most technically advanced. The primary use of target costing was to bring the target cost and the estimated cost of a product into line by better specification and design. Toyota set its cost planning goals and set out to achieve those goals through aggressive design changes. Cost planning could begin even before for the blueprints first test model were drawn. Second, estimating the total difference instead of the total cost tended to be less troublesome and more accurate, and finally, it helped the related divisions understand cost fluctuations. Profit targets for the life of the new model were calculated as differences between estimates and targets.

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The Steps of Implementing Target Costing

10 Pages Posted: 17 Aug 2009 Last revised: 3 Feb 2014

Mahmud Hematfar

Islamic Azad University (IAU) - Borujerd Branch

Alireza Sanati-arasteh

Islamic azad university (iau) - hamedan branch, saeid nooryan.

Social Security Organization-Iran

Date Written: April 17, 2013

Target costing has a history of more than 40 years in the Japanese industry. In 1959, Toyota developed the preliminary target costing approach. Although many manufacturers in Japan use target costing, the system used at Toyota Motor Corporation is the oldest and considered by many the most technically advanced. While the idea of systematic cost reduction had existed at Toyota since it was founded, the process was first codified in the mid-1960s, when the firm set itself the objective of producing a $1,000 car (Cooper, 2002). Most managements in the United States and the world, however, do not know enough about target costing to understand its importance and often underestimate the power of target costing as a serious competitive tool. When general managers read the world 'costing' they naturally assume it is a topic for their finance or accounting staff. They misunderestimate that target costing is really a systematic profit and cost management process. This article begins with the role management accounting, definition of target costing and an overview of the target costing process. It than describes the steps that are necessary to implement target costing.

Keywords: target costing, cost management, costing, management accounting

JEL Classification: M40, M46

Suggested Citation: Suggested Citation

Mahmud Hematfar (Contact Author)

Islamic azad university (iau) - borujerd branch ( email ).

Borujerd Iran

Hamedan Iran

Social Security Organization-Iran ( email )

hamedan razan hamedan, AR 584721 361284 Iran

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Cost Analysis: Toyota, the Kaizen Vehicles

2022, SSRN Electronic Journal

Toyota Motor Corporation (TMC) is a multinational corporation that has been selling about 10 million vehicles per year. The research paper investigates how Toyota Motor Corporation analyzes costs, using cost classifications, activity-based costing, DOWNTIME, cost behaviors, cost-volume-profit analysis, and budgetary control. The resulting calculation predicts the volume of Toyota Corolla needed in the United States in the first quarters from 2023 to 2027 from sales revenue, operating income, fixed expenses, and contribution margin. With that in mind, the sales trend of Toyota Corolla will be fluctuating with a downward slope throughout the next 5 years in the United States. More important, Kaizen budget appears to be a major factor of accumulating short-term and long-term profits. Activity-based costing is the more efficient design for allocating resources and cost-volume-profit analysis is the more efficient method for producing the required amount of outputs in the future. Methodology: Annual Financial Report 2021, Financial Summary 2021, and Integrated Report 2021 of the Toyota Motor Corporation were adopted. Additionally, the software application Excel was used for computations and graphs. Keywords: cost classification, sales prediction, budget

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This paper deals about the problematic of target costing implementation into the managerial decisions. These decisions make value analysis principles for increasing in competitiveness by the setting off limits for maximum allowable costs which should not exceeded by company manufacturing. By this approach is possible to improve product quality, service, shortening the research and development period and continual effort to lower costs. Target costing as a modern method of calculation uses the principles of value analysis, by using instruments of functional cost analysis and quantitative-function deployment can provide a functional differentiation of the product. This approach has a high importance for quality assurance in pre-production phase and it's increasing. Application of target costing is growing in praxis still. Target costing calculation introduce system approach to quantify costs of product in the phase of constructive and development activities of production. Comparison target costing calculation and traditional calculation show target gap. Target costing calculation is new modern instrument that it facilitates to manage price of product by the customers' requirements. The price is determined by market and customer's needs. In this phase is possible to fix costs of product. In praxis we often meet with situation where the price of product is very high and customer is not ready to pay so much. Target costing calculation limits cost of production.

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Toyota Motor Corp.: Target Costing System Harvard Case Solution & Analysis

Home >> Business Case Studies >> Toyota Motor Corp.: Target Costing System

Explores target Toyota, value systems, which are considered the most advanced such system every major Japanese manufacturer. In particular, it describes the process of creating a strong Toyota cost reduction goals and the actions taken to achieve them. "Hide by Robin Cooper, Takao Tanaka Source : Harvard Business School 10 pages. Publication Date: May 30, 1997. Prod. #: 197031-PDF-ENG

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Develop Profitable New Products with Target Costing

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With the emergence of the lean enterprise and global competition, companies face ever-increasing competition. To survive, companies must become experts at developing products that deliver the quality and functionality that customers demand, while generating the desired profits. 1 One way to ensure that products are sufficiently profitable when launched is to subject them to target costing. 2

Target costing is primarily a technique to strategically manage a company’s future profits. It achieves this objective by determining the life-cycle cost at which a company must produce a proposed product with specified functionality and quality if the product is to be profitable at its anticipated selling price. 3 Target costing makes cost an input to the product development process, not an outcome of it. By estimating the anticipated selling price of a proposed product and by subtracting the desired profit margin, a company can establish its target cost. The key is then to design the product so that it satisfies customers and can be manufactured at its target cost.

In Japan, lean enterprises have learned to view target costing not as a stand-alone program, but as an integral part of the product development process. To document the “Japanese” approach to target costing, we visited seven companies with mature and effective target costing systems and documented their procedures in depth. The companies we studied were Isuzu Motors Ltd., Komatsu Limited, Nissan Motor Corporation, Olympus Optical Company Ltd., Toyota Motor Corporation, Sony Corporation, and Topcon Corporation. 4 While the target costing practices at each company differed, we identified a common underlying generic approach that we document here to give managers a road map for implementing target costing systems.

Target costing, to be effective, must be a highly disciplined process. The process used at the seven firms studied can be divided into three sections (see Figure 1 ). The discipline starts by forcing alignment with the marketplace and requiring a new level of specificity about what customers want and what price they are prepared to pay. Market analysis plays a critical role in shaping the market-driven costing section of target costing by determining so-called allowable costs. Target costing systems use these allowable costs to transmit the competitive cost pressures that the company faces to the product designers.

About the Authors

Robin Cooper is professor of management, Peter F. Drucker Graduate School of Management, Claremont Graduate University, and visiting professor, Goizueta Business School, Emory University.Regine Slagmulder is associate professor, Department of Business Administration, Tilburg University, and visiting professor, University of Ghent.

1. R. Cooper, When Lean Enterprises Collide: Competing Through Confrontation (Boston: Harvard Business School Press, 1995), p. 7.

2. R. Cooper and R. Slagmulder, Target Costing and Value Engineering (Portland, Oregon: Productivity Press, 1997).

3. Target costs should include any costs that are driven by the number of units sold. For example, if the company accepts responsibility for disposing of a product at the end of its useful life, these costs are included in the target cost. See:

R. Cooper and B. Chew, “Control Tomorrow’s Costs through Today’s Designs,” Harvard Business Review, volume 74, January–February 1996, pp. 88–97.

4. R. Cooper and T. Yoshikawa, “Isuzu Motors, Ltd.: Cost Creation Program” (Boston: Harvard Business School, case study 9-195-054);

R. Cooper, “Komatsu, Ltd. (A): Target Costing System” (Boston: Harvard Business School, case study 9-194-037);

R. Cooper, “Nissan Motor Company, Ltd.” (Boston: Harvard Business School, case study 9-194-040);

R. Cooper, “Olympus Optical Company, Ltd. (A): Cost Management for Short Life-Cycle Products” (Boston: Harvard Business School, case study 9-195-072);

R. Cooper, “Toyota Motor Corporation” (Boston: Harvard Business School, case study 9-197-031);

R. Cooper, “Sony Corporation: The Walkman Line”(Boston: Harvard Business School, case study 9-195-076); and

R. Cooper, “Topcon Corporation: Production Control System” (Boston: Harvard Business School, case study 9-195-082).

5. When firms sell the same product at different prices, for example, in different countries or through different channels, an average selling price is used.

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Target Cost

The development and production cost that a product cannot exceed if the customer is to be satisfied with the value of the product while the manufacturer obtains an acceptable return on its investment.

Toyota developed target costing for its small supplier group with which it has had long-term relations. Because there is no market price available from taking bids or conducting an auction, Toyota and its suppliers determine a correct/fair cost (and price) for a supplied item by estimating what the customer thinks the item is worth and then working backwards to take out cost (waste) to meet the price while preserving Toyota and supplier profit margins.

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TOYOTA MOTOR CORP TARGET COSTING SYSTEM Case Analysis and Case Solution

Posted by Peter Williams on Aug-09-2018

Introduction of TOYOTA MOTOR CORP TARGET COSTING SYSTEM Case Solution

The TOYOTA MOTOR CORP TARGET COSTING SYSTEM case study is a Harvard Business Review case study, which presents a simulated practical experience to the reader allowing them to learn about real life problems in the business world. The TOYOTA MOTOR CORP TARGET COSTING SYSTEM case consisted of a central issue to the organization, which had to be identified, analysed and creative solutions had to be drawn to tackle the issue. This paper presents the solved TOYOTA MOTOR CORP TARGET COSTING SYSTEM case analysis and case solution. The method through which the analysis is done is mentioned, followed by the relevant tools used in finding the solution.

The case solution first identifies the central issue to the TOYOTA MOTOR CORP TARGET COSTING SYSTEM case study, and the relevant stakeholders affected by this issue. This is known as the problem identification stage. After this, the relevant tools and models are used, which help in the case study analysis and case study solution. The tools used in identifying the solution consist of the SWOT Analysis, Porter Five Forces Analysis, PESTEL Analysis, VRIO analysis, Value Chain Analysis, BCG Matrix analysis, Ansoff Matrix analysis, and the Marketing Mix analysis. The solution consists of recommended strategies to overcome this central issue. It is a good idea to also propose alternative case study solutions, because if the main solution is not found feasible, then the alternative solutions could be implemented. Lastly, a good case study solution also includes an implementation plan for the recommendation strategies. This shows how through a step-by-step procedure as to how the central issue can be resolved.

Problem Identification of TOYOTA MOTOR CORP TARGET COSTING SYSTEM Case Solution

Harvard Business Review cases involve a central problem that is being faced by the organization and these problems affect a number of stakeholders. In the problem identification stage, the problem faced by TOYOTA MOTOR CORP TARGET COSTING SYSTEM is identified through reading of the case. This could be mentioned at the start of the reading, the middle or the end. At times in a case analysis, the problem may be clearly evident in the reading of the HBR case. At other times, finding the issue is the job of the person analysing the case. It is also important to understand what stakeholders are affected by the problem and how. The goals of the stakeholders and are the organization are also identified to ensure that the case study analysis are consistent with these.

Analysis of the TOYOTA MOTOR CORP TARGET COSTING SYSTEM HBR Case Study

The objective of the case should be focused on. This is doing the TOYOTA MOTOR CORP TARGET COSTING SYSTEM Case Solution. This analysis can be proceeded in a step-by-step procedure to ensure that effective solutions are found.

• In the first step, a growth path of the company can be formulated that lays down its vision, mission and strategic aims. These can usually be developed using the company history is provided in the case. Company history is helpful in a Business Case study as it helps one understand what the scope of the solutions will be for the case study.
• The next step is of understanding the company; its people, their priorities and the overall culture. This can be done by using company history. It can also be done by looking at anecdotal instances of managers or employees that are usually included in an HBR case study description to give the reader a real feel of the situation.
• Lastly, a timeline of the issues and events in the case needs to be made. Arranging events in a timeline allows one to predict the next few events that are likely to take place. It also helps one in developing the case study solutions. The timeline also helps in understanding the continuous challenges that are being faced by the organisation.

SWOT analysis of TOYOTA MOTOR CORP TARGET COSTING SYSTEM

An important tool that helps in addressing the central issue of the case and coming up with TOYOTA MOTOR CORP TARGET COSTING SYSTEM HBR case solution is the SWOT analysis.

• The SWOT analysis is a strategic management tool that lists down in the form of a matrix, an organisation's internal strengths and weaknesses, and external opportunities and threats. It helps in the strategic analysis of TOYOTA MOTOR CORP TARGET COSTING SYSTEM.
• Once this listing has been done, a clearer picture can be developed in regards to how strategies will be formed to address the main problem. For example, strengths will be used as an advantage in solving the issue.

Therefore, the SWOT analysis is a helpful tool in coming up with the TOYOTA MOTOR CORP TARGET COSTING SYSTEM Case Study answers. One does not need to remain restricted to using the traditional SWOT analysis, but the advanced TOWS matrix or weighted average SWOT analysis can also be used.

Porter Five Forces Analysis for TOYOTA MOTOR CORP TARGET COSTING SYSTEM

Another helpful tool in finding the case solutions is of Porter's Five Forces analysis. This is also a strategic tool that is used to analyse the competitive environment of the industry in which TOYOTA MOTOR CORP TARGET COSTING SYSTEM operates in. Analysis of the industry is important as businesses do not work in isolation in real life, but are affected by the business environment of the industry that they operate in. Harvard Business case studies represent real-life situations, and therefore, an analysis of the industry's competitive environment needs to be carried out to come up with more holistic case study solutions. In Porter's Five Forces analysis, the industry is analysed along 5 dimensions.

• These are the threats that the industry faces due to new entrants.
• It includes the threat of substitute products.
• It includes the bargaining power of buyers in the industry.
• It includes the bargaining power of suppliers in an industry.
• Lastly, the overall rivalry or competition within the industry is analysed.

This tool helps one understand the relative powers of the major players in the industry and its overall competitive dynamics. Actionable and practical solutions can then be developed by keeping these factors into perspective.

PESTEL Analysis of TOYOTA MOTOR CORP TARGET COSTING SYSTEM

Another helpful tool that should be used in finding the case study solutions is the PESTEL analysis. This also looks at the external business environment of the organisation helps in finding case study Analysis to real-life business issues as in HBR cases.

• The PESTEL analysis particularly looks at the macro environmental factors that affect the industry. These are the political, environmental, social, technological, environmental and legal (regulatory) factors affecting the industry.
• Factors within each of these 6 should be listed down, and analysis should be made as to how these affect the organisation under question.
• These factors are also responsible for the future growth and challenges within the industry. Hence, they should be taken into consideration when coming up with the TOYOTA MOTOR CORP TARGET COSTING SYSTEM case solution.

VRIO Analysis of TOYOTA MOTOR CORP TARGET COSTING SYSTEM

This is an analysis carried out to know about the internal strengths and capabilities of TOYOTA MOTOR CORP TARGET COSTING SYSTEM. Under the VRIO analysis, the following steps are carried out:

• The internal resources of TOYOTA MOTOR CORP TARGET COSTING SYSTEM are listed down.
• Each of these resources are assessed in terms of the value it brings to the organization.
• Each resource is assessed in terms of how rare it is. A rare resource is one that is not commonly used by competitors.
• Each resource is assessed whether it could be imitated by competition easily or not.
• Lastly, each resource is assessed in terms of whether the organization can use it to an advantage or not.

The analysis done on the 4 dimensions; Value, Rareness, Imitability, and Organization. If a resource is high on all of these 4, then it brings long-term competitive advantage. If a resource is high on Value, Rareness, and Imitability, then it brings an unused competitive advantage. If a resource is high on Value and Rareness, then it only brings temporary competitive advantage. If a resource is only valuable, then it’s a competitive parity. If it’s none, then it can be regarded as a competitive disadvantage.

Value Chain Analysis of TOYOTA MOTOR CORP TARGET COSTING SYSTEM

The Value chain analysis of TOYOTA MOTOR CORP TARGET COSTING SYSTEM helps in identifying the activities of an organization, and how these add value in terms of cost reduction and differentiation. This tool is used in the case study analysis as follows:

• The firm’s primary and support activities are listed down.
• Identifying the importance of these activities in the cost of the product and the differentiation they produce.
• Lastly, differentiation or cost reduction strategies are to be used for each of these activities to increase the overall value provided by these activities.

Recognizing value creating activities and enhancing the value that they create allow TOYOTA MOTOR CORP TARGET COSTING SYSTEM to increase its competitive advantage.

BCG Matrix of TOYOTA MOTOR CORP TARGET COSTING SYSTEM

The BCG Matrix is an important tool in deciding whether an organization should invest or divest in its strategic business units. The matrix involves placing the strategic business units of a business in one of four categories; question marks, stars, dogs and cash cows. The placement in these categories depends on the relative market share of the organization and the market growth of these strategic business units. The steps to be followed in this analysis is as follows:

• Identify the relative market share of each strategic business unit.
• Identify the market growth of each strategic business unit.
• Place these strategic business units in one of four categories. Question Marks are those strategic business units with high market share and low market growth rate. Stars are those strategic business units with high market share and high market growth rate. Cash Cows are those strategic business units with high market share and low market growth rate. Dogs are those strategic business units with low market share and low growth rate.
• Relevant strategies should be implemented for each strategic business unit depending on its position in the matrix.

The strategies identified from the TOYOTA MOTOR CORP TARGET COSTING SYSTEM BCG matrix and included in the case pdf. These are either to further develop the product, penetrate the market, develop the market, diversification, investing or divesting.

Ansoff Matrix of TOYOTA MOTOR CORP TARGET COSTING SYSTEM

Ansoff Matrix is an important strategic tool to come up with future strategies for TOYOTA MOTOR CORP TARGET COSTING SYSTEM in the case solution. It helps decide whether an organization should pursue future expansion in new markets and products or should it focus on existing markets and products.

• The organization can penetrate into existing markets with its existing products. This is known as market penetration strategy.
• The organization can develop new products for the existing market. This is known as product development strategy.
• The organization can enter new markets with its existing products. This is known as market development strategy.
• The organization can enter into new markets with new products. This is known as a diversification strategy.

The choice of strategy depends on the analysis of the previous tools used and the level of risk the organization is willing to take.

Marketing Mix of TOYOTA MOTOR CORP TARGET COSTING SYSTEM

TOYOTA MOTOR CORP TARGET COSTING SYSTEM needs to bring out certain responses from the market that it targets. To do so, it will need to use the marketing mix, which serves as a tool in helping bring out responses from the market. The 4 elements of the marketing mix are Product, Price, Place and Promotions. The following steps are required to carry out a marketing mix analysis and include this in the case study analysis.

• Analyse the company’s products and devise strategies to improve the product offering of the company.
• Analyse the company’s price points and devise strategies that could be based on competition, value or cost.
• Analyse the company’s promotion mix. This includes the advertisement, public relations, personal selling, sales promotion, and direct marketing. Strategies will be devised which makes use of a few or all of these elements.
• Analyse the company’s distribution and reach. Strategies can be devised to improve the availability of the company’s products.

TOYOTA MOTOR CORP TARGET COSTING SYSTEM Blue Ocean Strategy

The strategies devised and included in the TOYOTA MOTOR CORP TARGET COSTING SYSTEM case memo should have a blue ocean strategy. A blue ocean strategy is a strategy that involves firms seeking uncontested market spaces, which makes the competition of the company irrelevant. It involves coming up with new and unique products or ideas through innovation. This gives the organization a competitive advantage over other firms, unlike a red ocean strategy.

Competitors analysis of TOYOTA MOTOR CORP TARGET COSTING SYSTEM

The PESTEL analysis discussed previously looked at the macro environmental factors affecting business, but not the microenvironmental factors. One of the microenvironmental factors are competitors, which are addressed by a competitor analysis. The Competitors analysis of TOYOTA MOTOR CORP TARGET COSTING SYSTEM looks at the direct and indirect competitors within the industry that it operates in.

• This involves a detailed analysis of their actions and how these would affect the future strategies of TOYOTA MOTOR CORP TARGET COSTING SYSTEM.
• It involves looking at the current market share of the company and its competitors.
• It should compare the marketing mix elements of competitors, their supply chain, human resources, financial strength etc.
• It also should look at the potential opportunities and threats that these competitors pose on the company.

Organisation of the Analysis into TOYOTA MOTOR CORP TARGET COSTING SYSTEM Case Study Solution

Once various tools have been used to analyse the case, the findings of this analysis need to be incorporated into practical and actionable solutions. These solutions will also be the TOYOTA MOTOR CORP TARGET COSTING SYSTEM case answers. These are usually in the form of strategies that the organisation can adopt. The following step-by-step procedure can be used to organise the Harvard Business case solution and recommendations:

• The first step of the solution is to come up with a corporate level strategy for the organisation. This part consists of solutions that address issues faced by the organisation on a strategic level. This could include suggestions, changes or recommendations to the company's vision, mission and its strategic objectives. It can include recommendations on how the organisation can work towards achieving these strategic objectives. Furthermore, it needs to be explained how the stated recommendations will help in solving the main issue mentioned in the case and where the company will stand in the future as a result of these.
• The second step of the solution is to come up with a business level strategy. The HBR case studies may present issues faced by a part of the organisation. For example, the issues may be stated for marketing and the role of a marketing manager needs to be assumed. So, recommendations and suggestions need to address the strategy of the marketing department in this case. Therefore, the strategic objectives of this business unit (Marketing) will be laid down in the solutions and recommendations will be made as to how to achieve these objectives. Similar would be the case for any other business unit or department such as human resources, finance, IT etc. The important thing to note here is that the business level strategy needs to be aligned with the overall corporate strategy of the organisation. For example, if one suggests the organisation to focus on differentiation for competitive advantage as a corporate level strategy, then it can't be recommended for the TOYOTA MOTOR CORP TARGET COSTING SYSTEM Case Study Solution that the business unit should focus on costs.
• The third step is not compulsory but depends from case to case. In some HBR case studies, one may be required to analyse an issue at a department. This issue may be analysed for a manager or employee as well. In these cases, recommendations need to be made for these people. The solution may state that objectives that these people need to achieve and how these objectives would be achieved.

The case study analysis and solution, and TOYOTA MOTOR CORP TARGET COSTING SYSTEM case answers should be written down in the TOYOTA MOTOR CORP TARGET COSTING SYSTEM case memo, clearly identifying which part shows what. The TOYOTA MOTOR CORP TARGET COSTING SYSTEM case should be in a professional format, presenting points clearly that are well understood by the reader.

Alternate solution to the TOYOTA MOTOR CORP TARGET COSTING SYSTEM HBR case study

It is important to have more than one solution to the case study. This is the alternate solution that would be implemented if the original proposed solution is found infeasible or impossible due to a change in circumstances. The alternate solution for TOYOTA MOTOR CORP TARGET COSTING SYSTEM is presented in the same way as the original solution, where it consists of a corporate level strategy, business level strategy and other recommendations.

Implementation of TOYOTA MOTOR CORP TARGET COSTING SYSTEM Case Solution

The case study does not end at just providing recommendations to the issues at hand. One is also required to provide how these recommendations would be implemented. This is shown through a proper implementation framework. A detailed implementation framework helps in distinguishing between an average and an above average case study answer. A good implementation framework shows the proposed plan and how the organisations' resources would be used to achieve the objectives. It also lays down the changes needed to be made as well as the assumptions in the process.

• A proper implementation framework shows that one has clearly understood the case study and the main issue within it.
• It shows that one has been clarified with the HBR fundamentals on the topic.
• It shows that the details provided in the case have been properly analysed.
• It shows that one has developed an ability to prioritise recommendations and how these could be successfully implemented.
• The implementation framework also helps by removing out any recommendations that are not practical or actionable as these could not be implemented. Therefore, the implementation framework ensures that the solution to the TOYOTA MOTOR CORP TARGET COSTING SYSTEM Harvard case is complete and properly answered.

Recommendations and Action Plan for TOYOTA MOTOR CORP TARGET COSTING SYSTEM case analysis

For TOYOTA MOTOR CORP TARGET COSTING SYSTEM, based on the SWOT Analysis, Porter Five Forces Analysis, PESTEL Analysis, VRIO analysis, Value Chain Analysis, BCG Matrix analysis, Ansoff Matrix analysis, and the Marketing Mix analysis, the recommendations and action plan are as follows:

• TOYOTA MOTOR CORP TARGET COSTING SYSTEM should focus on making use of its strengths identified from the VRIO analysis to make the most of the opportunities identified from the PESTEL.
• TOYOTA MOTOR CORP TARGET COSTING SYSTEM should enhance the value creating activities within its value chain.
• TOYOTA MOTOR CORP TARGET COSTING SYSTEM should invest in its stars and cash cows, while getting rid of the dogs identified from the BCG Matrix analysis.
• To achieve its overall corporate and business level objectives, it should make use of the marketing mix tools to obtain desired results from its target market.

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Target Costing System Analysis

Statement of the problem.

Toyota Motor Corporation is one of the largest and most well-known automobile manufacturers in the world today. Apart from leading in quality the company is also known for its cost-cutting efficiency without compromising quality. As the paper on Toyota Motor Corporation says, Toyota has almost consistently been able to calculate its costs of new models correctly.

The automobile market is one of the most competitive markets in the world. The high level of competition, changing customer preferences, and environmental concerns have made this market very difficult for manufacturers to remain competitive. For all its efficiency in targeting cost, its true effectiveness can only be gauged by the actual success of its new models. The main problem here that the success or failure of a model that can happen in real-life situations has not been considered.

Assumptions

With its manufacturing efficiency, quality, and cost-cutting efficiency, Toyota Motor Corporation is holding a secure place in the automobile world. Unless any dramatic developments take place, the company will retain its place as a market leader for a long time to come. But the nature of the automobile industry especially in countries where Toyota operates is very mature and highly competitive. Even with world-class vehicles, it would require a very efficient marketing department to successfully market its models. There is no indication that Toyota is lagging behind in this department. But the fact is that other automobile companies too have matching capabilities of Toyota, with different strengths and of course weaknesses. There are many manufacturers who have the technology and marketing acumen to compete with Toyota. Other external concerns like environment and rising price of fuel also have to be considered. Unless the company tries to maintain its competitiveness its cost-targeting and estimating efforts will be meaningless. The high time lag of four years (which is quite common among auto manufacturers) between proposal and actual production is also a crucial factor that can impact the success or failure of a model in a competitive market.

Toyota Motor Corporation has undoubtedly shown that it is a world-class automobile manufacturer. It has consistently produced cars of the highest quality at competitive prices. Moreover, it has evolved a very efficient targeting system that is ‘technically’ one of the most advanced in the automobile sector. The company regularly introduced new and successful models almost every four years. It is also doing research and development of more eco-friendly automobiles. The combination of high technology, quality, and cost-effectiveness is an unbeatable combination. It can be assumed that the competitiveness of the company will remain high in the future also. In spite of all these advantages, market competitiveness, and other uncertain external factors cannot assure that the situation for the company will remain so in the future.

Alternative Solutions

The proposal for a new model always is made by the chief engineer. It can be assumed that such a proposal will come when the company has streamlined all operations for past launches and is ready to make and design new models. But in reality, the marketing department, who is familiar with the pulse of the market, is a better judge regarding the timing of a new launch. Hence the following two alternatives can be considered.

• The current practice followed for the launch of a new model is when a proposal for the same is given by the chief engineer. The marketing and other department then formulate a plan around the proposal and proceed with the design and production of the new model. The alternative would be that the chief engineer first meets the marketing department with the idea before giving a formal proposal.
• The marketing department could be given the responsibility of informing the company and the chief engineer that a new product or model with a certain design and performance be launched. This would be after a thorough study of the market.

Alternative ‘a’ would only be a slight improvement over the existing method followed by the company. In the case of the second alternative, a new model will be proposed when there is a possible future market for the new model. It would be the job of the chief engineer and other concerned departments to work through the plan proposed by the marketing department and not the other way around.

Decision: It has been decided that option ‘b’ would be the course of action taken by the company for future models. A meeting of the chief engineer and the marketing department will be held and the formalities worked out. The marketing department will have a team for market research. As and when they feel that the market is ready for a new model, a meeting with the chief engineer will be called. The chief engineer in turn will meet with the production and design departments. A proposal based on the recommendations of the marketing department will be given by the chief engineer. If possible, the model design can be included in the report. The rest of the procedure with regard to cost costing and cost estimation will follow the steps already formulated by Toyota Motor Corporation since it is a tried and tested method.

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Case Study Solutions

Toyota Motor Corp.: Target Costing System

Subjects Covered Cost accounting Cost control Design Product development

by Robin Cooper, Takao Tanaka

Source: Harvard Business School

10 pages. Publication Date: May 30, 1997. Prod. #: 197031-PDF-ENG

Toyota Motor Corp.: Target Costing System Harvard Case Study Solution and HBR and HBS Case Analysis

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Toyota Motor Corp.: Target Costing System

Subjects Covered Cost accounting Cost control Design Product development

by Robin Cooper, Takao Tanaka

Source: Harvard Business School

10 pages. Publication Date: May 30, 1997. Prod. #: 197031-PDF-ENG

Toyota Motor Corp.: Target Costing System Harvard Case Study Solution and HBR and HBS Case Analysis

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