Mercedes Benz All Activity Vehicle Essay

The manoeuvre representing case lit contains numerous examples of Japanese represent direction practices however, a couple of(prenominal) cases describe the practice session of tar confirm be by large companies distant Japan. The purpose of the Mercedes-Benz AAV case is to make do the warlike environment of a leading German automotive manufacturer and the keep companys response to changing competitive conditions. The pedagogics plan generally follows the suggested student subsidisation indecisions. In ordinates, I recommend rolling supernumerary material during the case word of honor. These questions atomic number 18 set by a check mark. pupil Assignment Questions1. What is the competitive environment face up by MB?Students will pass judgment a number of changes, including significant commercialise sh ar lost to Japanese companies such(prenominal) as Lexus. assay the impressiveness of a cultural change taking place within top counsel at Mercedes. Reinforce that Mercedes is a company that had neer lost money. They simply built the trump car their engineers could object and priced it above address. pauperization often exceeded supply. As a result, terms had never been a primary con postureration. Changes allow in exist competition crop innovation.2. How has MB reacted to the changing world market for high life elevator cars? Students should rate the following changes implemented by management at Mercedes try to get them to explain how different these approaches were from traditional strategies at Mercedes umteen new product introductionspartnering with suppliers trim down system complexitynew furiousness on cost controllayers of management reducedlead time from model to introduction reduced.3. Using Coopers cost, quality, officiateality chart, discuss the factors on which MB competes with some other automobile stickrs such as Jeep, Ford, and GM. If the instructor wishes to give a brief mini-lecture on Robin Coopers pick triplet and confrontation scheme, this is a great pourboire in the case discussion to do so. (Robin Cooper, When Lean Enterprises Collide, Boston Harvard telephone row School Press, 1995.) The factors areprice-at mid to upper operate of zonequality-at upper range of zone run forality-at upper range of zone.An fire point to discuss is that Mercedes does not produce the just about expensive sports utility vehicle. This billet is reserved for the Land R everywhere however, they strategically placed themselves toward the luxury end of the spectrum. Also, contrary many Japanese examples, Mercedes does not use bearing be as a strict cost control utensil to produce the lowest priced product in its class. 4. How does the AAV project link with MB strategy in terms of market reporting? The new introductions expand the product line of the traditionally luxury-oriented manufacturer. Recent product introductions embarrass the followingA classC classSLKE classM class.These n ew introductions include new sports cars and off-road vehicles. The C-class is a mid-sized vehicle sometimes referred to as the baby-Benz. permits discuss the instalments of the come out costing model and how these elements are developed. At this point in the discussion I normally write the direct costing commandment on the board and lead students to con spatial relationr sources of various inputs selling price margetarget cost.What are the sources of input for the intercommunicate selling price? Students will most likely identify the following sources of randomness customer focus multitudescomparable products living potential.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 emergence.What factors are considered when developing the ask margin? This question provides a link to finance classes. roughly students have studied the concepts of w eighted-average cost of chief city. I recommend spending a few minutes reviewing these concepts and linking cost of capital to crystallise present apprise (NPV) analysis. Because of the capital-intensive structure of automobile manufacturing, exertion volume is a faultfinding factor in determining individually models NPV. Students whitethorn identify the following points for determining a required margin. long-run profitabilitycost of capitalprofitability 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 make a change, market forces were considered. For example, changes included the addition of side airbags. In addition, the European press was exact o f a simulated wood-grain part. Management obdurate the part would re primary(prenominal) plastic because cost could not be passed on to the consumer. The main point to emphasize is the radiation diagram of the vehicle is dynamic thus cost must evolve to reflect the changing design characteristics.5. Explain the process of developing a component enormousness superpower. How can such an mogul guide managers in making cost diminution decisions? The index development process has five steps, as follows consumer enormousness family line rankingstarget cost parcel by function conventioning category function group matriximportance indextarget cost indexI recommend making slides of disconcerts 1-5 to quicken discussion. Index development is an important element in the early conceptualization arrange of the AAV. The indexes help to quantify some real abstract concepts. tabulate 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 importantly more important than economy and styling. knock back 2 represents a rough view of the cost by function group and the telling percentage. The information is used after to create a target cost index. submit 3 is best tacit by reading each category as a column.The rows explain the relative importance of each function group to satisfying each category define by customers. An interesting aspect of this tabularise is that the link between consumer preferences and engineering components is do explicit. Table 4 builds on Table 3 by weighting the percentages computed in Table 3 by the importance percentage 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 that atte mpts 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.6. How does MB approach cost reduction to arrive at target be? At this point, ask students to identify various value-engineering strategies. At Mercedes, cut down 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.7. How do suppliers factor into the target costing process? Why are they so critically important to the succeeder of the MB AAV? From the conceptual phase by dint of the exertion phase, the suppliers of systems for the AAV truly were partners. Suppliers attended fix meetings with the cost planners throughout the entire process. Thus, suppliers were design and development partners from very early stages of development, amenable for meeting cost targets. Why is the kinship with suppliers a crucial element in the success of the AAV? Suppliers provide entire systems for the AAV.The installation uses a JIT production system. In fact, many suppliers deliver directly to the assembly line, quite a than to a small warehouse. The Black Warrior River uninvolved Mercedes and a major system supplier. This supplier built a new production facility on the same side of the river as the Mercedes Benz plant to avoid attainable delays associated with accidents on a major bridge.8. What utilization does the accounting department play in the target costing process? Stress the fact that accountants were watchdogs in the target costing process. Their primary responsibility was to ensure costs did not exceed targets during the production phase. Thus, the accountants social function was as follows cost control actual vs. targetdevelopment stageproduction stage.What are some of th e organizational barriers that may challenge managers attempting to introduce TC systems? testify to get students to identify various impediments to target costing systems in the United States. Examples may includewillingness to share cost information with supplierssuppliers treated as adversariesgovernment regulations affecting exchange of information.