Tsingtao: Culture Transformation in China’s Oldest Beer Company

casestudyVolume 4, Issue 1, 2009

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Tsingtao: Culture Transformation in China’s Oldest Beer Company

What does culture reform look like in China’s oldest beer company? Tsingtao Beer, China’s largest exporters of beer, was established in 1903 by German settlers in Qingdao,

Transformation: Promoting a New Culture

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. They understood that this shift would be a process and involve many areas of the organization over time.

In 2005, they focused their efforts by embarking on a transformation model with thee key focus areas, to transform from:

A production oriented model to a market oriented modelProduct management to brand managementExpansion of production capacity to optimize operations capabilities

After doing substantial work within the organization to communicate the new culture at the upper levels, they explored the relationship between the company’s culture and their operational functions. They established the operational system of Tsingtao’s culture with four major modules: organization, institution, transmission, and evaluation.

Organization: At the organizational level, they set up two coaches and two employees within each unit to carry out training. In this way, they enabled everyone to take responsibility for the company culture project and reinforced the communication of the cultural messages at a personal level.

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China. They have a national marketing network with over 50 production plants and export to over 50 countries and regions globally. Today, their vision is to become a large international company with a globally influential brand and they are poised to confirm their strategic position as the “Chinese Beer Industry Leader and International Market Pioneer.”

In the recent decade, Tsingtao has been taking a hard look at their culture. Mobilizing their organization to move from a “larger then stronger” growth mentality to that of a “stronger then larger” strategy, they’ve initiated deep organizational reforms from top to bottom keeping culture central every step of the way. In this process, they reorganized their business models and integrated many functions and systems as they transitioned from a traditional Chinese state-run organization to an organization tooled and skilled for the future on the international stage.

Their challenges have been many. With mergers and acquisitions having been their primary growth mechanism, Tsingtao had aquired over 40 factories throughout China. In this highly fragmented environment they now needed to really focus on and emphasize their own brand. They had to change their strategy from simply producing a product to understanding and commanding a market. Tsingtao knew they needed to devise a strategy that would address these important issues.


Institutional: “Corporate Culture Strategy Planning” was a plan developed for providing guidance for the establishment of long term goals. This standardization, including templates for out-of-town companies, guaranteed the alignment of strategy and the continuity of implementation across the larger organization.Methods of Transmission: Tsingtao integrated management training, communications, press, intranet, social activities and other methods at the grass roots level to spread and reinforce the new cultural message.Evaluation: The evaluation component included the independent development of assessment and evaluation tools. Accumulating the data based on unique characteristics within the company’s culture allowed them to develop a basis for future corporate culture strategic plans.

In promoting the new corporate culture, communication played an active motivational role for the employees. Each work unit had a different understanding of the culture. Measures were taken to reinforce the culture through focus groups by sharing their ideas and best practices. They found that this kind of face-to-face communication was effective for most people within the organization. Written communications in the form of policies, books,

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newsletters were also used, as were special events and training.

Evaluating the Culture

Tsingtao had done extensive work developing their own model to measure culture and employee satisfaction along with other quantitative data collections. The Denison Organizational Culture Survey also played an important role in evaluating Tsingtao’s culture. Having first learned about it in the Harvard Business Review China article “Organizational Culture: Measuring and Developing It in Your Organization” (March, 2005), they administered the survey internally. In 2006/2007 Tsingtao turned to Mobley Group Pacific (MGP), Denison Consulting’s partner in Asia, for help with their survey results. Working in partnership with MGP, Tsingtao was able to objectively evaluate the strengths and challenges of their current culture. MGP helped Tsingtao review their results and turn them into action plans that integrated with their existing culture initiatives.

One component of this was to develop a balanced scorecard approach that included awards based on how well units integrated and embodied the company’s new culture messages. Awards such as “Corporate Culture Star Work Units” and

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The Denison Model

The Denison Model applies solid organizational culture priciples across industry, geographic region and 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.


“Outstanding Corporate Culture Workers” were personally handed out by the chairman annually. Using the scorecard approach provided them with constant data about how well they were achieving their goals while also allowing opportunities for feedback among each of the work units and groups.

Overcoming Challenges

The foundation of the company was based in the era of China’s planned economy with a production model that was fairly closed. Legacy ideas with regards to personnel such as “once promoted, never demoted” and “once in, never out” still lingered in the company. Still, there was a sense that the culture work done up to this point was starting to pay off and measures were being taken to change that mindset. The company believed that constant reflection allowed them to improve. Employees reflected not on what they had done that day but rather on whether they were able to make the changes necessary to improve their culture. A significant change in their thinking here was to find good employee skills for each position. They consciously found people to fit the right jobs; valuing performance over seniority. They also stopped the practice of promoting employees simply based on seniority.

Another area of focus was Capability Development. When the organization redefined and raised the company’s objectives, the employees themselves believed their abilities to be inadequate. The company now had clear and specific definitions for each job and role; the employees were now being molded to fit the company’s requirements and better satisfy the needs of the business strategy. To aid this, Tsingtao established the “Tsingtao Beer Management Institute” to develop resources, training courses, and to continue to cultivate the culture message throughout the organization.

Another way they were focusing on Capability Development is through knowledge management. The “Knowledge Channel” was launched in September of 2007. The “Knowledge Channel” is a forum employees can use to access information and share experiences and best practices. It was based on the idea that transferring knowledge is best done through shared stories of work experience

rather than books and classes. It is their belief that this type of knowledge transfer will better enhance the transformation of a worker from a traditional employee to a knowledgeable and innovated employee.

Participation in the “Knowledge Channel” has expanded since its beginning with over 2000 registered users. The knowledge channel has covered the headquarters, marketing and work units within production and manufacturing.

Finally, a third way they focused on Capability Development, was through the revision and implementation of an employee behavior code. They encouraged employees to provide opinions on the employee code of behavior. The company set forth the overall employee code and then asked each work unit to detail out plans for certain aspects of the code. For example, the museum planned out details for appearance and etiquette, while sales and marketing looked at character and ethics. They were allowed flexibility in how each unit presented these concepts to the rest of the company. Units were able to present through cartoons, animations, movies, and stories, etc. As a result of this increased involvement and empowerment, the company reports employees have improved in their code of behavior.

Training programs have seen significant increase throughout the organization. Tsingtao made strides to standardize their training program management and expanded their training opportunities. Their training materials include over 760 works. In 2007, they implemented over 90 training programs, 320 workshops with 13,751 participants. In Qingdao, training fees for 2007 were up 16% from 2006.

Business Awards and Growth

In 2007, they were named number one in “China’s 500 Most Valuable Brands” by the World Brand Laboratory. They also won the “2007 Most Globally Competitive Chinese Company” award and the “2007 Chinese Implementation of Strategy Star Organization Award.” In 2008, they received the “Best Management Practice Award” of Chinese companies.


Related Resources

“Tsingtao Beer Joint Stock Co., Ltd.” Harvard Business Review China (February, 2008)http://www.hbrchina.com/c/action_prize_article.do?layoutId=7&columnId=6&cateId=23&articleId=830

“Organizational Culture: Measuring and Developing It in Your Organization” Harvard Business Review China (March, 2005)

“Tsingtao Brewery” http://en.wikipedia.org/wiki/Tsingtao_Brewery

“China’s prized Tsingtao Beer setting up here.” Ekvitthayavechnukul, Chalida. The Nation (March 28, 2009)http://www.nationmultimedia.com/2009/03/28/

business/business_30099081.php

Contact Information

Denison Consulting, LLC121 West Washington, Suite 201Ann Arbor, Michigan 48104Phone: (734) 302-4002Fax: (734) 302-4023Email: [email protected]

Copyright Information

Copyright 2005-2009 Denison Consulting, LLCAll Rights Reserved.Unauthorized reproduction, in any manner, is prohibited.The Denison model, circumplex and survey are trade-marks of Denison Consulting, LLC.Version 1.0, April 2009

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 Million in profits. Early 2009 reports show they have maintained a 26.7% growth in their gross revenue 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 establish their first brewery outside of China.

Tsingtao attributes much of its growth in the last decade to the changes in their culture. The new culture system helped them keep key talent in the right positions with a better understanding of what was expected of employees. They feel optimistic about the progress they have made.

Tsingtao Beer

Joint Stock Co, Ltd.

1903 Founded by German Brewers1915 Taken over by the Japanese in WWI1945 Under supervision of Nationalist government in Nanjing1949 Became a State Owned Enterprise under the People’s Republic of China1972 Tsingtao Beer introduced in the United States1990s Company privatized1993 Merged with three other breweries in Qingdao2009 Asahi aquired 20% ownership from Anheuser-Busch InBevFormed a JV to open a brewery in Thailand - the first venture outside China.

This case study was written in cooperation with our partners Mobley Group Pacific with offic-es in Shanghai and Hong Kong. To learn more about MGP, visit:www.mobleygrouppacific.com

Tsingtao: Culture Transformation in China’s Oldest Beer Company

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