The Utilization of Target Costing in The Telecom Industry

The telecommunications industry in Europe has been under especially heavy cost pressure for years – at best, revenues are stagnating, but in most cases, they are in decline, an indicator of a mature market. Consequently, cost optimization becomes more important every year, and company structures that evolved during the growth phase of the business cycle must now be adjusted to align with profitability expectations. Faced with increasing global competition, many telecom companies 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.If they want to be ready to face the current and imminent changes in the industry, telcos will have to become more efficient in their planning process. Target costing itself is no revolution in the planning process – a focus on the customer's willingness to pay is revolutionary and in combination with demand-based charging the revolution begins reality. Thus, the target costing method focuses on a market oriented management, aiming to attract and satisfy the customer on the one hand and provide more efficient planning process on the other hand