Toyota Motor Corporation Australia Ltd (TMCA) adopted target costing to manage costs. It sets target prices and reduces costs through value engineering and supplier relationships. TMCA employs 3,800 people and generates $4 billion annually. It imports vehicles from Japan and supplies markets in Asia, Africa, Europe and Oceania. Target costing requires determining costs at the design phase, managing suppliers, and continuous value analysis. It impacts operations, costs, profits, employee behavior and motivation, and product quality through an integrated, cross-functional system focused on customer value.

1. TARGET COSTING
• TOYOTA MOTOR CORPORATION AUSTRALIA LTD
(TMCA)
• MUHAMMAD NADZAM ARIF BIN AHMAD BUKHARI
M131070414
• ABDUL AZIZ BIN MOHD TALIB
M131070614

2. 1. History of the Toyota Motor Corporation
Australia Ltd (TMCA)
• is a fully-owned subsidiary of Toyota Japan.
• operations commenced in 1959 with the import of
the Land Cruiser, and in 1963 a passenger car
assembly plant, which initially produced the Tiara,
was opened at Port Melbourne, in Victoria, Australia.
• In 1996, TMCA employed some 3,800 people and, in
addition, many thousands more are employed in
Toyota dealerships and supplier companies.
• Annual turnover of TMCA approaches $4 billion per
annum.

3. Continue…
• In addition to its domestic sales, TMCA supplied a
number of markets overseas including Japan, New
Zealand, Thailand, Malaysia, South Africa, Turkey and
Oceania.
• In 1996 new markets opened in the Middle East
(Saudi Arabia, United Arab Emirates, Oman, Kuwait,
Bahrain and Qatar).
• TMCA imports a wide range of vehicles from Japan,
including Lexus, Celica, Paseo, Starlet, LandCruiser,
Tarago, RAV4, HiLux, HiAce, Dyna and Coaster.

4. 2. Adopting Process & Technic of Target Costing
• 2.1 Determining The Target Price And Reducing
Selling Costs :
– setting the market price for the new models.
– Any reassessment of the selling price will
obviously impact on the planned profit margin
and target cost.
– While reductions in costs such as transportation
are pursued, the amounts are small relative to
those achieved by engineering and purchasing.

5. • 2.2 Managing Supplier Relationships To Achieve
Cost Targets :
– The Purchasing Division is a major player in the
PCP process at TMCA
– The buyers work closely with engineers in actively
participating in the VE/VA process
– They responsible for driving down costs of
components of new models
– the high level of specialized knowledge and
expertise

6. • 2.3 Value Engineering; Creativity In Cost Management :
– the process is generally described as VE/VA (that is
value engineering and value analysis) and
encompasses a number of activities performed by the
engineering staff.
– Value Engineering (VE) the cost planning activity,
begins at the part’s development stage and the results
are implemented during the prototype phase of the
part(s) development
– Value Analysis (VA) the cost reduction activity, begins
at the start of production, where VE ends, and
continues for the model life of the part.

7. Con’t…
– A number of factors influence the approach and
processes undertaken in value engineering at
Toyota Australia.
– These include: the lack of responsibility for,
involvement in the initial motor vehicle design;
– At TMCA value engineering is a critical part of
product cost planning, as it is the process whereby
cost reduction targets are translated into specific
actions, on a part by part basis.

8. • 2.4 Cost Targets And Value Analysis In
Manufacturing :
– the interaction of cost targets and cost savings
during the pre-SVP period
– the very specific targeting of activities or
processes allows manufacturing to concentrate on
problem areas
– the activities undertaken within manufacturing
also serves to encourage actions that lead to more
effective cost management.

9. 3. THE CHALLENGES OF ADOPTING TARGET
COSTING
3.1 - The adaptation of target costing to a western
context
3.2 - The operation of a target costing system within a
global product strategy
3.3 - The critical nature of value engineering to the
success of the target costing process
3.4 - The integrated nature of the cost management
system
3.5 - The cross-functional nature of the target costing
system

10. 4. THE IMPLICATION OF THE TECHNIC
• 4.1 THE IMPACT OF THE TECHNIC ON OPERATIONAL
PERFORMANCE AND THE COST
– Cost
– Profitability
– Systematic

11. • 4.2 THE EMPLOYEE BEHAVIOUR AND MOTIVATION
– integration is needed in the form of cross-
functional teams.
– Upper-level management support
– Members of the cross-functional team

12. • 4.3 THE QUALITY OF PRODUCTS / SERVICES
– external focus
– features that are of value to customers
– minimizing product cycle time.