Individual
Learning Project 2 Answer
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Target Costing
Institution Affiliation
Date
Introduction
Administration is a
critical stride in ensuring that a business is fruitful. This is important with
regards to retail selling and this makes it essential to have clear
administration approaches to oversee the general operations of the
organization. For Best Buy, it is recognizable that different people that are
involved already applied good management, a policy for the company to get the
current success that it is has. However, there is still room for improvement as
much more could be archived by using target costing as their management
technique. This is important for the overall achievement of the company to be
archived.
Rationale
for Selecting Target Costing
The rationale behind
target costing is that it will help the company to maximize its profits
depending on different customers they are serving. The company has operations
mainly in Mexico, America and Canada. In these markets, there is the
possibility of the company increasing their sales on several products but this
can only be archived through a different management technique. The most
suitable that has not been taken advantage of in this case is target costing.
The first scenario
that makes target costing suitable in this case is that there is a huge
difference in the customers that are served. The customers to the company’s
stores vary from individuals to construction firms as well as cooperate and
large scale buyers. All these people have different abilities when it comes to
making the purchases. However, it is noticeable that the company simply sells
to all of them at the same price and also has no differentiation for their
products. They sell these products at the same price not considering who is
buying and this is a gap the company should capitalize on so as to make sure
that they are able to increase the satisfaction that the customers get in the
long term from making purchases of goods from their stores.
By helping provide
products that have different purposes unlike the generalized ones, the company
can be able to target specific customers for the different needs that they
have. To start with, the individual customers often have a tendency to purchase
home electronics that they use for family or personal use (Blocher, Stout,
Juras and Cokins, 2015). This is something that leads them make more purchases
if they are able to get goods that suite them more. It is also recognizable
that the different customers like the corporate customers would be able to make
more purchases if they can get goods that are specifically made for them and
their needs.
The second aspect
that makes the use of target costing to be rational is that of making sure that
the exact product is delivered. Competition in the retail market is currently
very high. This is as a consequence of the distinctive retailers that have come
up and they are putting forth the same goods that are offered by Best Buy. So
by focusing on the product served suing this method it is possible to
accomplish several things. The first of this is that the company will be able
to differentiate the customers depending on their different financial ability.
This is because some customers are able to purchase expensive products while
others prefer purchasing low income goods.
This means the
company will be able to effectively budget for the cost that they are willing
to incur in making sure that the different goods are produced. They can be able
to effectively purchase goods at a certain price while clearly knowing the
profit margin that they will put in place will be able to compensate for the
different expenses. This generally increases the customer satisfaction while at
the same time making sure that the company benefits financially.
In-Depth Analysis of Target
Costing
Target costing is a management method that is largely used in
companies that produce and sale goods to the public. This is a method of
management that focuses on knowing the market and the product in an effort to
make sure that the seller presents a good that is favorable to different
consumers. It is basically defined as the process of identifying a product with
specific quality and performance to be produced at a certain cost and sold
within a predetermined period for the seller to be able to make a profit. This is a method that is used by many
manufactures and has proved to be beneficial.
It is notable that the process of target costing happens in two
main ways. The first of this is that the process can be done through market
driven process. Through this process, it is notable that the company first has
to focus on the markets that they are serving. Through this process the company
has to focus on analyzing the market that they serve. This means that they
should be able to identify the different segments that they serve at any one
time so as to make sure that they know who they are selling to (Hicks, 2010).
The initial step for the organization is to
ensure that they can set up objectives for the long term sales and profits that
they can have the
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