Construction Industry Strategic Cost Management

Following the worldwide economic downturn in 1997, the Hong Kong property bubble burst and the construction industry also turned bad. The construction industry cannot be recovered and restored its glorious history. The market of construction industry was in recession period, the number of construction projects was decreasing. Construction workers had insufficient work to do and the profit of construction industry decreased. At the same time, there were many other adverse economic conditions emerged that affected the construction industry. To survive, the construction industry had to search for opportunity to make profit and continuous development. However, this was difficult to find opportunity in the recession period. The management of construction industry gradually understood the importance of cost management and strengthen the management in each construction project.Due to the change of economic environment in Hong Kong, for example the booming price of construction material and decreasing number of construction projects, development of the nearby cities, the traditional cost management could not improve the effectiveness of cost management. This paper quoted the situation of Hong Kong construction company, and explained the effectiveness of strategic cost management was better than the traditional one. The company applied traditional cost management but failed. After that, it turned to apply strategic cost management and set out long term objective. As a result, the company gained profit.This paper consists of five parts:Part 1: Introduction, explain the background, objective and method of studyPart 2: Theory of cost management, including strategic cost management and traditional cost management; and literature reviewPart 3: Analysis the cost of construction industryPart 4: Case analysis about the difference between traditional and strategic cost managementPart 5: Conclusion.