Costing to support strategies for product development. An empirical study of large international companies

Abstract The aims of this study is to examine the relationship between strategies for new product development (NPD) and: 1) target costing (TC) usage; 2) life cycle costing (LCC) usage. Moreover, the study aims to find out how TC is applied and why companies adopt this strategic costing techniques. The study conducts qualitative interviews with seven large international organizations based in Europe and the United States and operating in Italy. While, the interview results show that TC, together the value engineering (VE) activities, is used across the all seven international organizations to support strategies for product development, few (2) companies tend to use LCC. Again, TC is used as both a performance measurement and strategic management tool. In particular, appears that these international organizations adopt TC for cost reduction during the research, development and engineering (RD&E) cycle in order to be more competitive. Although significant progress has been made over the last two decades in describing strategic costing and management accounting practices, the contributions of this study to the management accounting and control (MAC) literature involve both research content and design. The paper looks at the use of different management accounting systems (MAS) and hence takes a more holistic view at MAC in NPD processes. Overall, our paper provides new evidence for the debate concerning the need that costs are integrated into strategy using a variety of strategic cost analyses.