Target Costing applied in major Portuguese companies

Abstract

The globalization of economies is characterized by a strong external pressure on companies that leads to an increased international competition.

The market price is strongly influenced by competition and by the price the consumer is willing to pay for a particular kind of good.

The Target Costing strategic management tool responds to this issue. This tool establishes the maximum amount allowable for a given product, when it is still in the development phase, rather than the usual "cost plus costing" procedure which the calculation of the selling price is made after all the costs incurred.

This tool has been used in several countries of Europe, America, Asia and Oceania. This paper presents a comparative analysis of foreign countries, but the essence of the study is the use of Target Costing by Portugal’s largest companies.