Question

.   Do you have examples of the various collaborative approaches to cost management and why might they be successful?

Answer 1

The Collaborative approach is a structured method in cost management division used by business organisations to design products and services. The collaborative approach is divided into two segments that are target pricing and cost-saving sharing.
Target pricing is an innovative cost management approach which is used at the time of product development. It helps to establish the relationship between buyers and sellers and reduce the gap in costs. Target pricing indicates the allowable cost that may be obtained by eliminating the profit from sales price.
For example, the development team of a vehicle organisation may work with the marketing team to determine the product prices before selling the vehicle. The price of a new car is determined by measuring its segments and manufacturing efforts and costing. After analysing the whole costing, the manufacturer determines the target price that a purchaser hopes to attain from the suppliers. It helps the organisation to negotiate with its customers individually on each transaction.
Cost-saving sharing approach is different from the target pricing as it requires joint identification of the full cost to manufacture any product. With the help of this approach, marketers enable to address the competitive advantages by reducing the mail expenses as the prices are shared.
For instance: after establishing the target price of the car for the first contract with the supplier, the purchaser makes additional cost reduction through an effort to lower the costs by cost-saving sharing approach year over year.