Mercedes Benz

During the recession in 1990, Mercedes -Benz struggled to adapt to changing markets. The luxury car market lost money for the first time in history in the 90’s. In 1993, there was a big sales slump in Mercedes-Benz sales. In its search for additional market share, new segments, and new niches Mercedes started developing a range of new products. One of the most radical and largest of the new range of products is AAV (all activity vehicles). In order to be competitive in the market, Mercedes-Benz needs to control costs and also meet the customer requirements at the same time. To achieve this goal, Mercedes-Benz adapted target costing. Is Mercedes-Benz heading in a right direction with target costing? Should they continue to use it? If target costing is not appropriate what is the best alternative?
Mercedes-Benz is a world renowned company which primarily operated in the luxury market segment before the 1990 recession. Because of the recession in 1990, the luxury market took a hit and Mercedes-Benz struggled with cost efficiency, product development, material purchasing, and problem in adapting changes. A modular construction process was used to produce the AAV. Functional groups with representatives from different areas like marketing, development, engineering, purchasing, production, and controlling were used to design the vehicle and production system. From the concept development to production commencement, it only took 5 years. After comparing existing production lines with various market segments for opportunities, the management discovered the sports utility vehicle market is rapidly expanding. During the project realization phase, engineers designed a prototype which was viewed by customers to let engineers know how they received it. The customers were also asked to rank the importance of various features such as safety, comfort, economy, and styling. During the production phase, the accounting system served as a controlling mechanism to ensure