1.0 Introduction
Intense competition and pressure from customers to reduce prices has forced many companies to reduce their costs to survive. Automotive manufacturers such as BMW and Mercedes have found that most of their costs are committed once the production begins, and thus, the cost must be reduced earlier in the product life cycle, particularly while the product is in the planning and design stages.
Mercedes Benz is a multinational division of the German manufacturer Daimler AG, headquartered in Stuttgart. The brand is often used for building luxury automobiles, buses, coaches, and trucks, widely known as one of the most established and oldest automotive brand in the world today.

2.1 Cost Management Techniques Adopted by Mercedes Benz

2.1.1 Target Costing
Target costing prices are assumed to be set by the market on a competitive basis. In a market economy, values are defined by the users. As Mercedes move closer toward a global economy, prices increasingly become uncontrollable variables, while costs, because of technological advances, increasingly become controllable variables. When selling price and profit margin are fixed by competitive pressures and management policies, respectively, reducing the firm’s production costs may be the only source of increased earnings.
Mercedes Benz, one of the worlds most prestigious and tradition laden car makers, has taken its time to wake up to the daunting dimensions of the challenges it faces in the rapidly changing world car market of the 1990’s. Instead of developing the ultimate car based on an image of effortless superiority and then charging a correspondingly sky high price as in the past, Mercedes Benz is taking the dramatic and radical step of moving to target pricing. (Financial Times, 2009) It will then decide what customer is willing to pay in a particular product category – priced against its