The Application Of Target Costing Management In Automotive Enterprises New Products Development

To implement a cost reduction strategy, reduce cost on an across-the-board basis, and enhance fund incremental profits is an everlasting theme of business management and root objective which business operation and capital operation are pursuing on market economic condition. To minimize cost consumption and maximize capital incremental profits are the direct objective and main target. Without profit, neither the country nor enterprises nor even its staff will be able to survive. If the consumption is too high, living condition will be affected. If this is the case, further developments will not be possible. In our country, a low level of cost management, a high level of cost consumption, and negative economic efficiency are always the factors which prevent enterprises, especially state-owned enterprises, from survival, making profits, and developing. Here, we saw a negative cost consciousness and week cost control ability. Moreover, cost management theory, content, method, pattern, and system are too rigid, outmoded and lack systematization. Therefore, they will not be able to meet the demands of cost management in market economic conditions. In view of this, there is an urgent need for improving and innovating the cost management methods. In this way, cost management theory and content systematization will be achieved. Also, the target of minimizing enterprises cost consumption and maximizing capital incremental profits can be realized. How can enterprises gain more profits in conditions that guarantee product quality and function on a lower investment and lowest cost basis? We should say that the implementation of target costing management is the most effective solution. Target costing management originated in Japan. It was innovated and expanded based on target management, which was brought in from America. Its target cost was worked out from its acceptable price and anticipated profit target plus effective control and management. Target cost management is an across-the-board operation system which combines business operation and development strategy with market competition organically. It has been adopted by many enterprises and the results are very effective. This thesis analyzes and discusses the theoretical method of target cost management as well as its application in the Auto Industry in details. At the beginning of 80's last century, FAW group established corresponding organization and started target cost activity. However, due to the affect of planned economy, we didn't have the full market competition. At that time, automobile were still considered as sparse resources. As long as the production came out, no worry about selling them out. Therefore, the business enterprise led us to reproduce rather than reorganize the business. This result in the target cost organization suffered from twists and turns. At the beginning of this century, as the opening of the market, the national automobile industry saw a more relaxed policy for the export and import. Not only domestic automobile market flood into the marketplace, the foreign automobile leaders also flows into the market in succession. The automobile business enterprises are facing with unprecedented cut throat competition. Whether each business enterprise can launch the quality products with low price and high performance has become the prerequisite for them to survive and go to success. Judging form the current market trend, Japan and Korea automobiles won out with its low price and high performance advantage on the marketplace. Their business profitability is also on the top of the list. But the domestic automobile business enterprises haven't yet form a management system, which have affected business development to a large extent. As the development phase decided 70% to 80% of its costs, thus, FAW reconsider and decided to set up cost management system in Jie Fang business automobile system which is responsible for R&D by itself. Take target cost activity in the process of new products development. This in turn, business enterprises tend to be more competitive. Therefore, combine theories research with practice, it pays to build up the way of target cost management which is fit for the new product development of domestic auto industry. It has its practical values and means a lot to the auto industry. This thesis is mainly divided into six chapters. First, to introduce the market competition situation that domestic automobile business enterprises are face with. And state the necessity of target cost management in domestic auto industry. Second, the illustration and analysis of target cost management thesis. This part introduced relative theoretical knowledge of target cost management. Third, introduction and analysis of target cost management application status both athome and abroad. It provides domestic business enterprises with references for setting up target cost management. Then, through the process research to the application of target cost management, combined with the development process of advanced new auto products, stated the target cost control process in detail, set up workable working flow process. The author took the real cases of the application of target cost management in new products development in FAW Jie Fang as the argumentations of above mentioned control process, working flow process and methods. This part is the key of the whole thesis. Last, but not the least, summarize the key points in target costing management that domestic auto industries should pay attention to and look into the future prospect.