Volvo Case Study

Declaration

This report is submitted as partial fulfilment of the requirements for Module MBA 406 Financial & Managerial Accounting at the European Business School London. We declare that this document embodies the results of the group’s work and that it has been composed by the group. Following normal academic conventions, we have made due acknowledgement of the work of others.

We have worked together as a group and we have all contributed equally and would therefore be graded as a group.

London, 27/11/2009

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Adriana Arias Fouad El Ghzal

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Nikola Pamler Balakrishnan Ramesh

Table of Contents

Declaration 2

Table of Figures 4

Executive Summary 5

Company profile of the VOLVO Group and the VOLVO Car Corporation 6

The background of the case study 8

Question one 10

Barriers to change 12

Question two 14

Similarities 15

Differences 16

Considerations for a change today 16

Question three 17

PKS 17

Current System (TCM) 18

Comparison 19

Effects of changes 20

Question four 21

The current VOLVO Cost Control System 21

Organizational functions 22

Question five 24

Target cost 24

Cost targets 25

Cost Requirement 26

Comparison and preference 26

Question six 27

The project gate system 27

The statuses on the cost requirements 30

Benefits of having these different statuses on cost requirements 32

Further development for the future 32

Conclusion 33

Bibliography 34

Appendix I 35

VOLVO group financial statistics – balance sheets 35

Appendix II 36

Key financial statistics, VOLVO Group 36

Table of Figures

Figure 1: VOLVO company profile 6

Figure 2: VOLVO's path to process 8

Figure 3: Balance sheet VOLVO 1986 – 1991 20

Figure 4: The three stages of product development activities and related cost control activities 21

Figure 5: Target costs 25

Figure 6: The new...