103340399 TATA Nano Target Costing
Contents
EXECUTIVE SUMMARY 6
TARGET COSTING 7
TATA NANO – THE INTRODUCTION 9
A BREAK THROUGH CAR 11
COST CUTTING FEATURES 12
TARGET PRICING THE NANO 13
Product Features 13
Dimension 13
Engine specifications for Tata Nano 14
Safety features for Tata Nano – The 1 Lakh car 14
How green is Tata Nano? 14
IDEA GENERATION OF NANO 14
THE COST – THE TARGET 16
THE COST REDUCTION PARADIGM 17
Value Engineering Alternatives: 17
Now the question was, “how much to produce” 17
PRODUCT DEVELOPMENT 18
The Final verdict: THE CAR COST IS Rs 1 lac 18
ENGINEERING IT 19
Costs, outsourcing and beyond 20
Cost Price Structure 21
Safety Issues 22
STEPS TO ESTABLISH TARGET COST 23
1. Re-orient culture and attitudes. 23
2. Establish a market-driven target price. 23
3. Determine the target cost. 23
4. Balance target cost with requirements. 23
5. Establish a target costing process and a team-based organization. 23
6. Brainstorm and analyze alternatives. 23
7. Establish product cost models to support decision-making. 23
8. Use tools to reduce costs. 24
9. Reduce indirect cost application. 24
10. Measure results and maintain management focus. 24
CHALLENGES FACED DURING THE DEVELOPMENT OF TATA NANO 24
Question of Safety 25
Mass Motorization 25
Used car market effects 25
Cases of Fire 26
Competitors 26
APPENDIX 27
Target Costing Pressures on New Products 27
CONCLUSION 27
SPECIFICATIONS 28
Outsourced Parts Supplier Information 29
COMPARISON 31
TATA NANO PRICES ON THE TATA MOTORS’S WEBSITE 31
TATA NANO OFFICIAL FINANCERS AT LAUNCH 32
THE APPLICATION FORM 34
THE ACCESSORIES PRICE LIST 35
GLOSSARY 36
REFRENCES 39
EXECUTIVE SUMMARY
This report explains the concept of target costing through the case of Tata Nano. Target costing is the process of determining the maximum allowable cost for a new product and then developing a prototype that can be profitably made for that maximum target cost figure. A number of companies--primarily in Japan--use target costing, including Compaq, Ford, Isuzu Motors, ITT,
EXECUTIVE SUMMARY 6
TARGET COSTING 7
TATA NANO – THE INTRODUCTION 9
A BREAK THROUGH CAR 11
COST CUTTING FEATURES 12
TARGET PRICING THE NANO 13
Product Features 13
Dimension 13
Engine specifications for Tata Nano 14
Safety features for Tata Nano – The 1 Lakh car 14
How green is Tata Nano? 14
IDEA GENERATION OF NANO 14
THE COST – THE TARGET 16
THE COST REDUCTION PARADIGM 17
Value Engineering Alternatives: 17
Now the question was, “how much to produce” 17
PRODUCT DEVELOPMENT 18
The Final verdict: THE CAR COST IS Rs 1 lac 18
ENGINEERING IT 19
Costs, outsourcing and beyond 20
Cost Price Structure 21
Safety Issues 22
STEPS TO ESTABLISH TARGET COST 23
1. Re-orient culture and attitudes. 23
2. Establish a market-driven target price. 23
3. Determine the target cost. 23
4. Balance target cost with requirements. 23
5. Establish a target costing process and a team-based organization. 23
6. Brainstorm and analyze alternatives. 23
7. Establish product cost models to support decision-making. 23
8. Use tools to reduce costs. 24
9. Reduce indirect cost application. 24
10. Measure results and maintain management focus. 24
CHALLENGES FACED DURING THE DEVELOPMENT OF TATA NANO 24
Question of Safety 25
Mass Motorization 25
Used car market effects 25
Cases of Fire 26
Competitors 26
APPENDIX 27
Target Costing Pressures on New Products 27
CONCLUSION 27
SPECIFICATIONS 28
Outsourced Parts Supplier Information 29
COMPARISON 31
TATA NANO PRICES ON THE TATA MOTORS’S WEBSITE 31
TATA NANO OFFICIAL FINANCERS AT LAUNCH 32
THE APPLICATION FORM 34
THE ACCESSORIES PRICE LIST 35
GLOSSARY 36
REFRENCES 39
EXECUTIVE SUMMARY
This report explains the concept of target costing through the case of Tata Nano. Target costing is the process of determining the maximum allowable cost for a new product and then developing a prototype that can be profitably made for that maximum target cost figure. A number of companies--primarily in Japan--use target costing, including Compaq, Ford, Isuzu Motors, ITT,