Achieving effective cost reduction through the application of Japanese management accounting techniques : the extent of its local applicability

Abstract

Intense competition and pressure from customers to reduce prices have forced many companies to reduce their costs to maintain their existence within the market. However, it is not always easy to achieve effective cost reduction without putting at stake quality and other important characteristics of a product. Japanese companies have been noticeably successful at controlling costs without tearing out the innovative heart of a business. Cost aware and creative employees, just-in-time production, autonomous quality assurance and an in-built flexibility in the process layout and employee skills, are dominant features of the Japanese management approach which creates a cost-aware and quality-conscious culture across the organisation The objective of this dissertation is to determine whether an effective cost reduction would be achieved if one were to apply these Japanese management techniques within the local manufacturing scenario. The study first gives some background information on the historical development of the Japanese economy and defines the most well-known Japanese management techniques forming part of the Toyota Production System. It then concentrates on :findings derived from interviews posed to local businesses. This chapter reveals whether these foreign practices are being applied within the local scenario and, where applicable, evaluates their implications. A discussion on such :findings is carried out to see whether the use of Japanese techniques is actually reducing the company's production costs. The final chapter sums up the main conclusions. From the personal interviews made with the selected local companies, it showed clearly that such techniques are proving to be very beneficial in achieving cost reduction whilst maintaining high quality throughout the production process.