How the Japanese Keep Costs Low
United States
Japan
Market Research
Market Research
Product Characteristics
Product Characteristics
Planned Selling Price
Less Desired Profit
Design
Engineering
Target Cost
Supplier Pricing
Design
Cost
If cost is too high,
Return to design phase
Engineering
Supplier Pricing
Target costs for each component force
Marketers, designers, and engineers from
All depts. And suppliers to struggle
And negotiate trade-offs.
Manufacturing
Manufacturing
Periodic Cost Reduction
Continuous Cost Reduction
Different
Strategy 2:
Product
extension
Communication
Adaptation
Strategy 4:
Dual
Adaptation
Strategy 1:
Dual extension
Strategy 3:
Product
adaptation
Communication
extension
Same
Different
Communication
Same
Product
Rank
Value
(Billions)
1. Coca-Cola
69.9
2. Microsoft
65.1
3. IBM
52.8
4. GE
42.4
5. Nokia
35.0
6. Intel
34.7
7. Disney
32.6
8. Ford
30.1
9. McDonald’s
25.3
10. AT&T
22.8
11. Marlboro
22.0
12. Mercedes
21.7
13. Citibank
19.0
14. Toyota
18.5
15. Hewlett-Packard
17.9
16. Cisco Systems
17.2
17. American Express
16.9
18. Gillette
15.3
19. Merrill Lynch
15.0
20. Sony
15.0
21. Honda
14.6
22. BMW
13.9
23.Nescafe
13.2
24. Compaq
12.3
Communication
Same
Same
Easiest, riskiest
Product
Different
Exxon’s formula
varied,
”Tiger in the tank”
didn’t
Different
Prod.sells for
different.
reasons
(Perrier “chic”)
True multi-national,
global
(Unilever prods.)