Free Essay

Mb Aav-Project Case

In:

Submitted By muttamu77
Words 1430
Pages 6
C) Använd Coopers tre dimensioner och diskutera de faktorer som MB skulle tvingas konkurrera med andra biltillverkarna som Jeep, Ford och GM.
Using Cooper’s cost, quality, functionality chart, discuss the factors on which MB competes with other automobile producers such as Jeep, Ford, and GM. (If the instructor wishes to give a brief mini-lecture on Robin Cooper’s survival triplet and confrontation strategy,2 this is a good point in the case discussion to do so.) The factors are:
* price—at mid to upper range of zone;
* quality—at upper range of zone;
* functionality—at upper range of zone.
An interesting point to discuss is that Mercedes does not produce the most expensive sports utility vehicle. This distinction is reserved for the Land Rover; however, they strategically placed themselves toward the luxury end of the spectrum. Also, unlike many Japanese examples, Mercedes does not use target costing as a strict cost control mechanism to produce the lowest priced product in its class.
D) Hur kan AAV-projektet kopplas till MBs strategi i fråga om marknadstäckning?
The new introductions expand the product line of the traditionally luxury-oriented manufacturer. Recent product introductions include the following:
* A Class
* C Class
* SLK
* E Class
* M Class
These new introductions include new sports cars and off-road vehicles. The C Class is a mid-sized vehicle sometimes referred to as the baby-Benz.
# Let’s discuss the elements of the target costing model and how these elements are developed.
At this point in the discussion I usually write the target costing formula on the board and ask students to consider sources of various inputs:
* target selling price
* target profit margin
* target cost
# What are the sources of input for the projected target selling price?
Students will most likely identify the following sources of information:
* customer focus groups
* comparable products
- existing
- potential
3
Stress the broad, cross-functional aspects of acquiring consumer information. To compare products, the company had to evaluate existing competitive vehicles as well as vehicles under development.
# What factors are considered when developing the required target profit margin?
This question provides a link to finance classes. Most students have studied the concepts of weighted-average cost of capital. I recommend spending a few minutes reviewing these concepts and linking cost of capital to net present value (NPV) analysis. Because of the capital-intensive structure of automobile manufacturing, production volume is a critical factor in determining each model’s NPV. Students may identify the following points for determining a required target profit margin.
* long-run profitability
* cost of capital
* profitability across the entire product mix (classes of vehicles)
* sales volume by class
# The MB case suggests the target cost is “alive.” Is this consistent with the ideals of target costing?
I generally emphasize that Mercedes did not consider the target cost to be locked in. It was a moving target. As engineering changes became necessary, the target cost was allowed to move. However, before making a change, market forces were considered. For example, changes included the addition of side airbags. In addition, the European press was critical of a simulated wood-grain part. Management decided the part would remain plastic because costs could not be passed on to the consumer. The main point to emphasize is the design of the vehicle is dynamic, thus costs must evolve to reflect the changing design characteristics.
----------------------------------------------------------------------
MB strategy in terms of market coverage was to streamline its core business and the AAV project helped MB to accomplish just that. MB wanted additional market share, new segments, and new niches. MB started developing a new set of products like the C-class, E-class, SLK, A-class and M-class. To enter into the sports utility vehicle market MB used the AAV project. In accordance with the MB strategy, AAV was expected to get additional market share with the help of AAV, it expected to enter a new segment that was the sports utility vehicle segment through AAV and it expected to capture a niche for itself by launching a high-end AAV with the characteristics of a Mercedes-Benz. The streamlined MB organization produced an entirely new vehicle from concept to production in just four years.
E) Förklara processen att utveckla ett värdeindex för en funktionsgrupp eller komponent. Hur kan ett sådant index stödja och vägleda beslutsfattande om kostnadsreduceringar?
The index development process has five steps, as follows:
* consumer importance category rankings
* target cost and percentage by function group
* category vs. function group matrix (function group contribution to customer requirements)
* importance index of the various function groups
* target cost index.
4
The instructor can make slides of Tables 1-5 to facilitate discussion. Index development is an important element in the early conceptualization phase of the AAV. The indexes help to quantify some very abstract concepts.
Table 1; From conversations with potential consumer groups, a list of key categories was developed. Next, potential customers were asked to rate the importance of each category. Their responses were computed as a percentage. Thus, safety and comfort of the AAV were viewed as significantly more important than economy and styling.
Table 2; represents a rough estimate of the target cost by function group and the relative percentage of each group of total target costs. The information is used later to create a target cost index.
Table 3; is best understood by reading each category as a column. The rows explain the relative importance of each function group to satisfying each category defined by customers. An interesting aspect of this table is that the link between consumer preferences and engineering components is made explicit.
Table 4; builds on Table 3 by weighting the percentages computed in Table 3 by the importance percentages calculated in Table 1. The key point is to understand which function groups contribute the most (least) to important (less important) consumer categories.
Table 5; results in a target cost index for each function group that attempts to capture cost and benefit trade-offs. As discussed in the case, this index may indicate a cost in excess of the perceived value of a function group. Thus, opportunities for cost reduction (aligned with customer requirements) may be identified.
--------------------------------------------------------------------
Potential customers were asked to consider various different factors that they believed to be of most significance while purchasing a vehicle, and the most important rankings were tabulated in categories. Each category was given an importance weight that was converted into a relative percentage. For this calculation, the customers, suppliers and designers were consulted. The target cost was calculated by first creating five functional groups, such as (1) chassis, (2) transmission, (3) air conditioner, (4) electric system and (5) other function groups. Each was given a percentage of target cost. For example, 20% of target costs were allocated to chassis. Again potential customers were used to correlate the degree to which each function group correlated to customer requirements. A percentage was allocated to each category. For, example chassis contributed to 50% of the safety requirements, 30% to comfort, 10% to economy and 10% styling. Finally, these percentages were multiplied by the relative percentage assigned to each category by the customer and results were added across each function groups. Thus, when the chassis functional group was multiplied by each relative percentage allocated, the sum turned out to be 0.33. This was the importance index of chassis. Managers at MB used indexes such as these during the concept design phase to understand the relationship of the importance of a function group to the target cost of a function group. Indexes less than one indicated a cost in excess of the perceived value of the function group. Thus, opportunities for cost reduction, consistent with customer demands were identified so they were able to be managed during the early stages of product development.
5
F) Hur går MB tillväga med kostnadsreduceringar för att uppnå målkostnader?
At this point, ask students to identify various value-engineering strategies. At Mercedes, reducing the cost of each function group was accomplished by reducing costs of various components that make up the function group. Stress the importance of this approach over an “across-the-board” cut.
-----------------------------------------------------------------------
In order to realize the set target cost for the AAV, estimates were made of the existing cost of each function group. Next, components of each function group were identified with their associated costs. Cost reduction targets were set by comparing the estimated existing cost with the target cost for each function group. As part of the competitive benchmark process, MB brought and tore down competitors’ vehicles to help better understand their costs and manufacturing process.

Similar Documents

Free Essay

Mercedes Benz Aav Project

...Benz AAV Project 1. Q. What is the competitive environment faced by MB? Ans; Mercedes Benz is a world know Luxury car brand. Their main competitors are BMW, Lexus, Acura, Audi etc. At that time, not many of their luxury brand competitors were into AAV cars, companies who had AAVs in the market were GM, ford Jeep etc. But this was a rapidly growing market. 2. Q. How has MB reacted to the changing world for luxury automobiles? Ans: Luxury Car makers were hit hard by the recession the early 1990s. The car sales plunged and companies were showing losses. Mercedes Benz struggled with product development, cost efficiency, material purchasing, and problems in adapting to changing markets to face the tough market conditions Mercedes made several changes within its business. Mercedes streamlined the core business, reduced parts and system complexity, established simultaneous engineering programs with suppliers. In search of additional market share and new segments, MB started developing new range of products. New products introduced were the C-Class in 1993, the E-class in 1995, the new sportster SLK in 1996, and A class and M class all-activity vehicle (AAV) in 1997. In addition, MB moved its manufacturing facilities closer to the market that is the USA. Most, importantly it became more customer oriented and used customer opinions for developing almost every part of the car 3. Q. Using Cooper’s cost, quality and functionality chart, discuss the factors on which MB competes...

Words: 1253 - Pages: 6

Premium Essay

Cases in Accounting Practices

...Cases from Management Accounting Practice Volume 15 edited by Wayne Bremser Villanova University Jim Mackey California State University Sacramento The American Accounting Association (Management Accounting Section) Institute of Management Accountants (Committee on Academic Relations) Published by Institute of Management Accountants 10 Paragon Drive, Montvale, NJ 07645-1760 Claire Barth, editor and compositor Copyright © 2000 by Institute of Management Accountants. All rights reserved. IMA publication number 00355 ISBN 0-86641-291-3 Preface T he cases in this volume were presented at the Management Accounting Section of the American Accounting Association’s 2000 annual meeting in Mesa, Arizona. The cases describe the implementation and application of management accounting innovations to systems designed to support the maintenance and creation of value in the modern enterprise. Each of the cases presents an application of management accounting techniques to support change management. Starting with an excellent review of the strategic management of new product lines by Mercedes Benz, Tom Albright contributes an interesting and insightful picture of how target costs need to consider both current and strategic value issues. Mercedes’ use of a target cost index to integrate cost and strategic value is particularly interesting. The next three cases focus on the implementation and use of the balanced scorecard and performance measures to influence...

Words: 6154 - Pages: 25

Free Essay

General

...THE STUDENT'S PRACTICAL DICTIONARY ; fNdkoq ; CONTAINING English words with English and Hindi Meanings and Pronunciation in Deva Nagri Character with an Appendix containing Familiar Foreign Words and Phrases and Abbreviations in Common use. FIFTEENTH EDITION Thoroughly Revised,Improved,Enlarged and Illustrated PRICE 3 RUPESS ALLAHABAD RAM NARAIN LAL PUBLISHER AND BOOKSELLER 1936 ISCII text of dictionary taken from from TDIL's ftp: anu.tdil.gov.in pub dict site I N 1.m I Pron 1.m a Det 1.ek, abatement N abbey N 1.kmF, GVtF, GVAv, mdApn, b A, 2.yAg, smAE ag jF vZmAlA kA Tm a"r tTA -vr, 2.tk mphlA kESpt pzq vA -tAv  , aback Adv 1.acAnk, ekAek, 2.pFC  abandon VT 1.CoX  nA, yAg  nA, yAgnA, tjnA, d d 2.EbnA aAj^ nA nOkrF CoXnA, apn kodrAcAr aAEd mCoX  nA,   d ,   nA d d abandoned A 1.CoXA h,aA, Enjn-TAn, 2.EbgXA h,aA, iEdy lolp, lMpV, drAcArF, aAvArA , , abandonment N 1.pZ yAg, sMpZ aAmosg,   EbSkl CoX  nA d , abate VI 1.km honA, GVnA, DFmA honA abate VT 1.km krnA, GVAnA, DFmA krnA, m@ym krnA, rok  nA, smA krnA d 1 1.IsAiyo kA mW, gz\ArA, kVF, mW, , , 2.mht  aADFn sADao kF mXlF k , abbot N 1.mht, mWDArF, mWAEDkArF abbreviate VT 1.km krnA, s" krnA, CoVA krnA, p sAr EnkAlnA abbreviation N 1.s" , GVAv, sAr, lG,!p, skt, p  2.sE" pd yAf, fNd yA pd kA lG!p ^ , abdicate VTI 1.-vQCA s CoXnA, yAg krnA, tjnA,   pd yAg krnA abdication N 1.pd yAg abdomen N 1.X, V, k"F, udr p p , abdominal A 1.udr sMbDF, V kA p abduct VI 1.BgA l jAnA, EnkAl l...

Words: 164153 - Pages: 657