Implementation of Target Costing as an Early-Stage Startup: An Experimental Case Study
A startup must be able to deal with many risks and uncertainties to become successful. One way to reduce uncertainties and promote growth in a startup are Management Control Systems (MCS) (Davila and Foster, 2005, p. 1041). Target costing is one of these MCS that is commonly used in larger companies to develop profitable new products (Zengin and Ada, 2010, p. 5597). In this case study, we want to address the question of whether the use of target costing is also suitable for startups that are in the stage of developing their product idea. We therefore conduct a case study and implement the stages of the target costing framework from Ellram (2006) with data of an early-stage startup. In addition, we focus on implementing sustainable product features during product development and investigate whether it is possible to link sustainability and target costing. We come to the conclusion that target costing in general is only of limited use for startups, as a lot of specific data is required. On the other hand, sustainability can be combined successfully with the target costing approach.