Unlocking Profit Potential: A Study on Target Cost Management Guidelines for Micro, Small, and Medium-Sized Enterprises

Abstract

The purpose of this research was to examine the guidelines for target cost management. Data was collected from 400 Micro, Small and Medium-sized Enterprises in Thailand by questionnaire mail survey. The key informants were accounting executives. Structural equation modelling (SEM) was employed as a statistical technique to test the research relationships. The results revealed the guidelines for target cost management. The highest means consisted of customer orientation, design process management, product life cycle cost management, value chain management, target price strategy, and teamwork development. The analysis results of the structural equation model were satisfied through the evaluation criteria with the following parameters: Chi-square probability of 0.134, relative Chi-square of 1.133, correlation index of 0.961, and root index of the mean square of the error estimate of 0.018. To improve and increase the benefits of target cost management, executives need to determine how to implement target cost management in a business. Thus, firms need to create a business vision, be aware of competitive forces, and manage organizational changes through outstanding restructuring, redesign, and re-engineering of their practices, operations, functions, and strategies in order to meet target cost management implementation requirements. Further research is needed to expand and validate the benefits of this study. Investigating other populations, especially in Southeast Asia, is necessary to confirm the findings’ applicability. Different results in future studies may limit the study’s generalizability. With an empirical verification of the research relationships, this study attempted to conceptualize of TCM. This research also confirmed existing literature of dynamic capability theory in which firms implement TCM as a valuable source of their business competitive. This study underscores the importance of Target Cost Management (TCM) as a strategic tool for pricing and cost control, providing valuable insights for firms in volatile markets, particularly in Thailand.