Drawing into an in-depth case study of the VOLVO Car Corporation’s strategy in the early 1990s, before the Ford takeover in 1999, this paper represents historical insight into the working and cost methodology of VOLVO Car Corporation (VCC – now part of Ford). The following observations and conclusions were made:
During the 1980’s VCC did not focused on cost control at all as they had a strong financial performance and it was manufacturing high quality products.
The situation changed in the mid-late 1990’s where cost control became more of a priority for the whole organisation. This was one of the main reasons for the failure of the first attempt in implementing the Product Costing System (PKS) and the target costing Management (TCM) methods in the 1980’s. However, the implementation of these two systems in cost controlling was embraced more openly in the 1990’s.
Additionally, the core elements of both PKS and TCM systems were involving every organisation department including all its employees in predicting and defining the viable production and target sales costs at the very early stage of the project.
At last, policies designed to reduce inventory costs and slim the distribution pipeline affect the business profitability.
Company profile of the VOLVO Group and the VOLVO Car Corporation
Figure 1: VOLVO company profile
VOLVO is a manufacturer of trucks, buses, construction equipment, drive systems for marine, aerospace components and services, as well as a provider for financing services and solutions to its customers (DATAMONITOR, 2009).
VOLVO was founded in 1927 by Assar Gabrielsson and Gustaf Larsson with its first assembly in Gothenburg, Sweden. Today Gothenburg is still the headquarters of the VOLVO Group (DATAMONITOR, 2009).
In the first year the company produced only 297 cars but as they started in 1928 producing trucks, the “Series 1”, VOLVO had their first big success within and outside Sweden (VOLVO Group Global,...