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Tsingtao: Culture Transformation in China’s Oldest Beer Company

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The 100-year-old beer company is steeped in tradition, history, and culture and they recognized that to keep their position and grow in the international stage, they would need to make some …

The 100-year-old beer company is steeped in tradition, history, and culture and they recognized that to keep their position and grow in the international stage, they would need to make some transformations. As early as 2001, Tsingtao began to implement their “stronger then larger” growth strategy, encompassing deep organizational reforms. The task in front of them was to improve the organizational culture and use it as a competitive advantage, while keeping in line with the new organizational strategy.

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  • 1. Volume 4, Issue 1, 2009 casestudy Tsingtao: Culture Transformation in China’s Oldest Beer Company What does culture Transformation: Promoting a New Culture reform look like in The 100-year-old beer company is steeped in China’s oldest beer tradition, history, and culture and they recognized company? Tsingtao that to keep their position and grow in the Beer, China’s largest international stage, they would need to make exporters of beer, some transformations. As early as 2001, Tsingtao was established in began to implement their “stronger then larger” 1903 by German growth strategy, encompassing deep organizational settlers in Qingdao, reforms. The task in front of them was to improve China. They have a national marketing network with the organizational culture and use it as a competitive over 50 production plants and export to over 50 advantage, while keeping in line with the new countries and regions globally. Today, their vision is to organizational strategy. They understood that this become a large international company with a globally shift would be a process and involve many areas of influential brand and they are poised to confirm their the organization over time. strategic position as the “Chinese Beer Industry Leader and International Market Pioneer.” In 2005, they focused their efforts by embarking on a transformation model with thee key focus areas, to In the recent decade, Tsingtao has been taking a transform from: hard look at their culture. Mobilizing their organization to move from a “larger then stronger” growth 1. A production oriented model to a market oriented mentality to that of a “stronger then larger” strategy, model they’ve initiated deep organizational reforms from top 2. Product management to brand management to bottom keeping culture central every step of the 3. Expansion of production capacity to optimize way. In this process, they reorganized their business operations capabilities models and integrated many functions and systems as they transitioned from a traditional Chinese state- After doing substantial work within the organization run organization to an organization tooled and skilled to communicate the new culture at the upper for the future on the international stage. levels, they explored the relationship between the company’s culture and their operational functions. Their challenges have been many. With mergers They established the operational system of Tsingtao’s and acquisitions having been their primary growth culture with four major modules: organization, mechanism, Tsingtao had aquired over 40 factories institution, transmission, and evaluation. throughout China. In this highly fragmented environment they now needed to really focus on and • Organization: At the organizational level, they emphasize their own brand. They had to change set up two coaches and two employees within their strategy from simply producing a product to each unit to carry out training. In this way, they understanding and commanding a market. Tsingtao enabled everyone to take responsibility for the knew they needed to devise a strategy that would company culture project and reinforced the address these important issues. communication of the cultural messages at a personal level. All content © copyright 2005-2009 Denison Consulting, LLC. All rights reserved. l www.denisonculture.com l Page 1
  • 2. • Institutional: “Corporate Culture Strategy newsletters were also used, as were special events Planning” was a plan developed for providing and training. guidance for the establishment of long term goals. This standardization, including templates Evaluating the Culture for out-of-town companies, guaranteed the Tsingtao had done extensive work developing alignment of strategy and the continuity of their own model to measure culture and employee implementation across the larger organization. satisfaction along with other quantitative data • Methods of Transmission: Tsingtao integrated collections. The Denison Organizational Culture management training, communications, press, Survey also played an important role in evaluating intranet, social activities and other methods at the Tsingtao’s culture. Having first learned about it grass roots level to spread and reinforce the new in the Harvard Business Review China article cultural message. “Organizational Culture: Measuring and Developing • Evaluation: The evaluation component included It in Your Organization” (March, 2005), they the independent development of assessment and administered the survey internally. In 2006/2007 evaluation tools. Accumulating the data based Tsingtao turned to Mobley Group Pacific (MGP), on unique characteristics within the company’s Denison Consulting’s partner in Asia, for help with culture allowed them to develop a basis for future their survey results. Working in partnership with corporate culture strategic plans. MGP, Tsingtao was able to objectively evaluate the strengths and challenges of their current culture. In promoting the new corporate culture, MGP helped Tsingtao review their results and turn communication played an active motivational role them into action plans that integrated with their for the employees. Each work unit had a different existing culture initiatives. understanding of the culture. Measures were taken to reinforce the culture through focus groups by sharing One component of this was to develop a balanced their ideas and best practices. They found that this scorecard approach that included awards based kind of face-to-face communication was effective on how well units integrated and embodied the for most people within the organization. Written company’s new culture messages. Awards such communications in the form of policies, books, as “Corporate Culture Star Work Units” and The Denison Model The Denison Model applies solid organizational culture priciples across industry, geographic region and Copyright © Denison Consulting LLC, All Rights Reserved sector. Tsingtao Beer used the Denison Organizational Culture survey to measure their organization’s health and achievement of their goals. English and Chinese Simplified circumplex graphs shown above. All content © copyright 2005-2009 Denison Consulting, LLC. All rights reserved. l www.denisonculture.com l Page 2
  • 3. “Outstanding Corporate Culture Workers” were rather than books and classes. It is their belief that personally handed out by the chairman annually. this type of knowledge transfer will better enhance Using the scorecard approach provided them with the transformation of a worker from a traditional constant data about how well they were achieving employee to a knowledgeable and innovated their goals while also allowing opportunities for employee. feedback among each of the work units and groups. Participation in the “Knowledge Channel” has Overcoming Challenges expanded since its beginning with over 2000 registered users. The knowledge channel has The foundation of the company was based in the era covered the headquarters, marketing and work units of China’s planned economy with a production model within production and manufacturing. that was fairly closed. Legacy ideas with regards to personnel such as “once promoted, never demoted” Finally, a third way they focused on Capability and “once in, never out” still lingered in the company. Development, was through the revision and Still, there was a sense that the culture work done implementation of an employee behavior code. They up to this point was starting to pay off and measures encouraged employees to provide opinions on the were being taken to change that mindset. The employee code of behavior. The company set forth company believed that constant reflection allowed the overall employee code and then asked each them to improve. Employees reflected not on what work unit to detail out plans for certain aspects of they had done that day but rather on whether the code. For example, the museum planned out they were able to make the changes necessary to details for appearance and etiquette, while sales improve their culture. A significant change in their and marketing looked at character and ethics. They thinking here was to find good employee skills for were allowed flexibility in how each unit presented each position. They consciously found people to fit these concepts to the rest of the company. Units the right jobs; valuing performance over seniority. were able to present through cartoons, animations, They also stopped the practice of promoting movies, and stories, etc. As a result of this increased employees simply based on seniority. involvement and empowerment, the company reports employees have improved in their code of Another area of focus was Capability Development. behavior. When the organization redefined and raised the company’s objectives, the employees themselves believed their abilities to be inadequate. The Training programs have seen significant increase company now had clear and specific definitions for throughout the organization. Tsingtao made strides each job and role; the employees were now being to standardize their training program management molded to fit the company’s requirements and better and expanded their training opportunities. Their satisfy the needs of the business strategy. To aid this, training materials include over 760 works. In 2007, Tsingtao established the “Tsingtao Beer Management they implemented over 90 training programs, 320 Institute” to develop resources, training courses, workshops with 13,751 participants. In Qingdao, and to continue to cultivate the culture message training fees for 2007 were up 16% from 2006. throughout the organization. Business Awards and Growth Another way they were focusing on Capability In 2007, they were named number one in “China’s Development is through knowledge management. 500 Most Valuable Brands” by the World Brand The “Knowledge Channel” was launched in Laboratory. They also won the “2007 Most Globally September of 2007. The “Knowledge Channel” is Competitive Chinese Company” award and the a forum employees can use to access information “2007 Chinese Implementation of Strategy Star and share experiences and best practices. It was Organization Award.” In 2008, they received the based on the idea that transferring knowledge is “Best Management Practice Award” of Chinese best done through shared stories of work experience companies. All content © copyright 2005-2009 Denison Consulting, LLC. All rights reserved. l www.denisonculture.com l Page 3
  • 4. Key economic indicators such as sales volume, revenue and retained profits continue to increase. In 2008, they saw a $2.2 Billion revenue with $100 Tsingtao Beer Million in profits. Early 2009 reports show they have maintained a 26.7% growth in their gross revenue Joint Stock Co, Ltd. even in tough economic times. They have also been expanding and in March of 2009 announced a joint venture with a group of investors in Thailand to 1903 establish their first brewery outside of China. Founded by German Brewers 1915 Tsingtao attributes much of its growth in the last Taken over by the Japanese in WWI decade to the changes in their culture. The new 1945 culture system helped them keep key talent in the Under supervision of Nationalist government right positions with a better understanding of what in Nanjing was expected of employees. They feel optimistic 1949 about the progress they have made. Became a State Owned Enterprise under the People’s Republic of China 1972 Tsingtao Beer introduced in the United States 1990s Related Resources Company privatized “Tsingtao Beer Joint Stock Co., Ltd.” Harvard 1993 Business Review China (February, 2008) Merged with three other breweries in http://www.hbrchina.com/c/action_prize_article. Qingdao do?layoutId=7&columnId=6&cateId=23&articleId= 2009 830 Asahi aquired 20% ownership from Anheuser-Busch InBev “Organizational Culture: Measuring and Formed a JV to open a brewery in Thailand Developing It in Your Organization” Harvard - the first venture outside China. Business Review China (March, 2005) “Tsingtao Brewery” http://en.wikipedia.org/wiki/ Tsingtao_Brewery “China’s prized Tsingtao Beer setting up here.” This case study was written in Ekvitthayavechnukul, Chalida. The Nation (March cooperation with our partners 28, 2009) Mobley Group Pacific with offic- http://www.nationmultimedia.com/2009/03/28/ es in Shanghai and Hong Kong. To learn more about MGP, visit: business/business_30099081.php www.mobleygrouppacific.com Contact Information Copyright Information Denison Consulting, LLC Copyright 2005-2009 Denison Consulting, LLC 121 West Washington, Suite 201 All Rights Reserved. Ann Arbor, Michigan 48104 Unauthorized reproduction, in any manner, is prohibited. Phone: (734) 302-4002 The Denison model, circumplex and survey are trade- Fax: (734) 302-4023 marks of Denison Consulting, LLC. Email: TalkToUs@denisonconsulting.com Version 1.0, April 2009 All content © copyright 2005-2009 Denison Consulting, LLC. All rights reserved. l www.denisonculture.com l Page 4