Abstract

The long-term financial success of any business depends on whether its prices exceed its costs by enough to finance growth, provide for reinvestment and satisfy shareholders. To achieve a sufficient margin over its costs, target costing has evolved as a standard instrument of cost management. This article presents the potentialities of using target costing strategy in the Thai market. A questionnaire survey is used to identify manufacturing firms in Thailand that have adopted target costing, to explore their approach to implementing it and to identify the success factors behind implementation. It is found that about 50 per cent of respondents practiced target costing as a tool to manage their firms’ targeted profits, and the majority of them implemented target costing for their new-launch products and for redeveloping existing production. The success factors in implementing target costing of these firms in Thailand underline the support of top management as the first key factor, followed by an empowered project manager and, thirdly, the proper tools and information systems. Unquestionably the success of implementing target costing needs cross-functional understanding. As a result, the firms that have adopted target costing understand the product concept and see quality improvement and cost reduction in their firms. The result from this research provides us confidence that target costing could be one of the major keys to long-term business survival, growth and prosperity in a competitive and rapidly changing environment in Thailand.