MIT Sloan Management Review

Faced with increasing global competition, many firms are finding that cost-based pricing is becoming a relic of the past, whereas price-based or target costing is emerging as a key strategic tool. Consistent with the notion of price-based costing, several authors have argued that target costing is a superior approach to cost reduction and control when [...]

With the emergence of the lean enterprise and global competition, companies face ever-increasing competition. To survive, companies must become experts at developing products that deliver the quality and functionality that customers demand, while generating the desired profits.1 One way to ensure that products are sufficiently profitable when launched is to subject them to target costing.2
Target [...]

In a world of corporate refocusing, down-sizing, and outsourcing, a critical strategic decision that many senior managers make is determining their firm’s boundary. “Which business activities should be brought within the boundary of the firm?” and “Which business activities should be outsourced?” are essential strategic questions in determining a firm’s boundary. Firms that bring the [...]

Why do companies frequently make bad investment decisions and continue to blunder, even after the weaknesses in their capital budgeting analyses are evident? Because, say the authors, they don’t integrate capital budgeting into their overall strategy. To address this, the authors present a framework for dynamic capital budgeting that can help managers make intelligent investment decisions with a long-term strategy in mind.

If savers and investors and buyers and sellers could locate each other efficiently, purchase any and all assets at no cost, and make their decisions with freely available, perfect information, there would be no need for financial institutions. However, in real economies, market participants seek the services of financial institutions because they can provide market [...]

In 1992, Phar-Mor, Inc., the largest discount drugstore chain in the United States, filed for bankruptcy court protection following discovery of one of the largest business fraud and embezzlement schemes in U.S. history. Coopers & Lybrand, Phar-Mor’s former auditors, failed to detect inventory inflation and other financial manipulations that resulted in $985 million of earnings [...]

In this article, we examine acquiring companies’ cash flow performance after a merger in the fifty largest U.S. industrial takeovers from 1979 to mid-1984. In an earlier study, we showed that the mergers in this same sample created new value for the stockholders of the target company and the acquiring company combined.1 But our results [...]

Because companies’ relationships with employees, customers, suppliers and other stakeholders have changed, traditional accounting-based performance-measurement systems are obsolete. They lack the focus to evaluate intangibles — service, innovation, employee relations and flexibility. Companies that take a stakeholder approach to performance measurement can first capture strategic-planning issues, then can leverage their strategic-planning choices to create an optimal design for performance-measurement systems.

Ten years ago, Peter Drucker offered three reasons why the foundation and structure of the world economy had changed:

The uncoupling of the primary products and the industrial economies resulting in a decline in the comparative advantages of natural resources.
The uncoupling of employment and production within the industrial economy due largely to productivity gains associated with [...]

The competitiveness of U.S. corporations, particularly manufacturing firms, declined during the 1980s. The decade witnessed serious inroads by foreign firms into traditional domestic markets. In capital goods, for example, the import penetration ratio rose from less than 15 percent to nearly 40 percent. Some indicators of U.S. competitiveness have stabilized or shown some improvement in [...]