Implementation of target cost management in a non-Japanese environment

Abstract

Purpose Drawing from dynamic capability theory, this paper aims to examine the implementation of target cost management (TCM) in a non-Japanese environment. Design/methodology/approach Based on a case study at Company ABC, an automotive manufacturer in Malaysia, this paper investigates the differences in the TCM implementation process between Company ABC and companies operating in the Japanese business environment. The data were collected through in-depth interviews, direct observation and document reviews. Findings Using a single-case study approach, the findings show that although the case company follows similar fundamental steps of TCM as highlighted in the literature, it has modified the detail of the TCM steps to some extent to match with the company’s resources, business processes and strategic routines. Research limitations/implications As the study used a single-case study approach on an automotive company, the results cannot be generalized in other settings. The findings give an insight into the TCM implementation in a developing country such as Malaysia. Better understanding of TCM as a business competitive tool may help to promote TCM application in other developing countries. The findings help new potential TCM companies in the same industry to mitigate and leverage the risk of failure in implementing TCM by modifying the TCM implementation process to suit their contextual environments. Originality/value This paper attempts to explain in depth the TCM implementation process in the case company and highlights how the dynamic capabilities can cause differences in TCM practices compared to those practiced in the Japanese context.

Revisiting the relevance of strategic management accounting research

“…With respect to the use of case study method, the review found an extensive focus on the development of model (Englund and Gerdin, 2014; Barros and Ferreira, 2017; Cooper et al , 2017) and implementation process of a particular SMA technique (Herath et al , 2014; Cooper et al , 2019; Baharudin and Jusoh, 2019) in a particular organizational setting.…”

“…Woods et al (2012), using a case study of MNC, documented how economic value added is introduced in TC system and provided preliminary evidence on how TC can, while using with other SMA techniques, play the bridging role in connecting strategic process and profit generation. Baharudin and Jusoh (2019) demonstrated how a non-Japanese company (Malaysian automotive manufacturer) modified the fundamental steps of TCM to match with its resources, processes and strategic routines.…”

Tools for cost management

“…It is possible to think of target costing as a cost management system that focuses on price, customer, and project by incorporating various organizational functions (Abd; Jasim, 2019; Mao; Chen, 2021; Toosi; Chamikarpour, 2021). Its main objective is to adjust the operating cost of a product, i.e., a good or a service, to determine the target price and desired margins in the context of the company's strategic planning (Baharudin;Jusoh, 2019;Homburg et al, 2021a).…”

Prioritisation of barriers for supply chain management implementation in the Malaysian automotive industry

“…In fact, the achievement of Malaysia's automotive industry had attracted researchers to investigate relevant areas within the industry. For instance, works in the following research areas are worth mentioning like Quality Practices (Habidin et al, 2018;Habidin & Mohd Yusof, 2013;Mohd et al, 2011), Accounting and Costing (Baharudin & Jusoh, 2019) and Business Strategies (Nazir & Shavarebi, 2019).…”