Tsingtao Beer Entry to the Thai Market

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Executive Summary

Tsingtao’s entry to the Thai market requires a robust project management approach. The project scope includes construction of a beer brewery, and establishing a value chain in Thailand. The technical requirements for the project include the construction of a brewery that can produce three million bottles of liquor monthly.

The systems needed for the success of the project includes a change management system, and Project Management Office (PMO), and a risk management system. The project manager is a senior vice president of Tsingtao Beer. The project management team reports directly to the board. The main risks associated with the project arise from Tsingtao’s limited understanding of the business environment in Thailand.

Tsingtao Beer Project Plan

The Tsingtao Beer company is in the process of expanding its overseas operations to create new markets for its products. This document examines various aspects of the project plan developed to ensure the success of the new venture. The issues covered in this plan range from the work breakdown structure to project management tools and approaches used in the project.

Scale and Scope of Project

This project relates to the construction of the facilities for use in beer production in Thailand. A business development team from Tsingtao’s headquarters in Beijing will handle the commercial aspects of the project. The project objectives are as follows.

Project Objectives

The three objectives of this project are as follows.

The first objective of the project is to construct an operational brewery in Thailand with the capacity to handle the demands of Thai Consumers as well as to provide products for distribution in nearby markets.
The second objective of the project is to make preliminary business plans for the operations of the brewery.

Major Deliverables

Based on these objectives the list below provides the project deliverables associated with the project.

A fully functional beer brewery in Bangkok
Signed service and maintenance contracts with suppliers
Product supply contracts with rice farmers
A marketing strategy
Licenses, permits and regulatory approvals necessary for brewing operations in Thailand

Milestones

Table 1 below presents the milestones associated with the project

Milestone	Indicators
Completion of the construction of the brewery in Bangkok	This includes the civil works, electrical works, plumbing, construction of access roads and parking areas, and installation of equipment in the brewery
Signing of service and maintenance contracts with service providers	The company will sign supply contracts with an electrical engineering firm to provide consultancy on the electrical design of the facility. It also needs contracts with equipment manufacturers to supply and maintain beer-manufacturing equipment. In addition, the company will require contracts with utility providers such as phone companies, internet service providers as well as the region’s water company.
Signing of supply contracts with rice farmers	The company should sign sufficient contracts to assure it of a regular supply of rice for the production of beer
Completion of the development of a marketing strategy	Tsingtao must identify the market segments in Thailand’s beer market. In addition, the company needs a detailed understanding of the competitive environment to develop an effective market entry strategy.
Obtaining all licenses, permits and regulatory approvals	The company needs several licenses and permits to deliver on the project. It needs a permit from Thailand’s environmental agency as well as construction permits from local authorities. The company also needs a liquor-trading license as well as a business license to operate legally in Thailand.

Table 1: Milestones and Related Indicators

Technical Requirements

The technical requirements for this project are as follows. First, the project should deliver a brewery with a production capacity of three million bottles per month.

The brewery should have the capacity to store up to three months supply of rice to avert any supply shortages. The third technical requirement is that the water supply must be at least one hundred thousand cubic litres per day to support brewing operations. Electricity supply should be three-phase at 415 volts.

Speculative Work Breakdown Structure

The speculative work breakdown structure for this project is as follows.

1. Brewery construction

1.1 Architectural planning

1.2 Land survey

1.3 Obtaining of construction permits and regulatory approvals

Obtaining construction permits
Obtaining permits from the environmental management authority

1.4 Retaining contractors

Retaining architectural contractor
Retaining of electrical engineering contractor
Retaining of mechanical engineering contractor
Retaining of civil engineering contractor

1.5 Construction phase

Construction of foundations
Constructions of external and partitioning walls
Roofing
Installation of brewing equipment
Interior design

1.6 Handover of construction project to the company

2. Marketing strategy development

2.1 Marketing research

2.2 Market analysis

2.3 Market segmentation

Identification of market segments
Choice of market segments to serve

2.4 Branding decisions

2.5 Development of marketing objectives

2.6 Action plan

3. Business process contracts

3.1 Identifications of rice suppliers

Prequalification of suppliers by projected volume of production
Prequalification based on the quality of rice produced
Qualification of suppliers
Signing of supply contracts

3.2 Identification of product distributors

3.3 Obtaining trade licenses from government

Obtaining general trade licenses

3.4 Obtaining permits from alcohol regulators

Obtaining of liquor trading licenses

3.5 Environmental assessment

Retaining an environmental consultant to conduct an environmental audit
Presentation of report to environmental authority for approval

3.6 Identification of service contractors

Identification of electrical engineering services contractor
Identification of mechanical engineering service contractor

Systems to Ensure Project Success

The systems needed for the success of this project are as follows.

The Project Management Office (PMO)

Tsingtao usually implements various projects concurrently. Usually these projects relate to marketing, product development and streamlining of business process.

Tsingtao found it wise to establish a full time PMO to handle project management functions in the company. The PMO will provide the project management team in charge of the Thai expansion project with decision support and oversight to ensure that it meets all the required project management standards.

Change Management System

Change management is a vital part of project management. The change management system for this project has three aspects. First, it handles the chance that a senior project manager may leave the company at a critical stage of the process. The strategy in place is to ensure that every senior project manager shares responsibilities with a highly capable assistant who can provide continuity in case of staff changes.

Secondly, the company has retained lawyers in Thailand to keep an eye on the legal environment to ensure that Tsingtao enjoys the benefits provided by any new laws affecting foreign investments, and avoids the pitfalls associated with business in Thailand.

The third aspect of Tsingtao’s change management strategy is keeping an eye on the business aspects of the project. This includes observing changes in the tastes and preferences of the Thai consumers as well as the availability of supplies.

Project Control System

The project control system in place has two main aspects. First, the company gave sufficient space to the project management team to handle all issues relating to this project.

This team reports directly to the board of Tsingtao. Secondly, the PMO and the Internal Audit Department of Tsingtao provide immediate oversight of the activities of the project management team. Reports by the PMO and the Internal Audit Department form the basis of discussions of the project management team’s activities at the board.

Risk Management System

One of the main duties of the project manager is to keep track of risks that may affect the project The project management team has a risk matrix that forms the basis for risk identification and management.

This risk matrix makes it easy for the project management team to identify risks to the project through regular reviews. Every week, the project manager submits a report that contains a risk appraisal of the project based on the risk matrix developed for this project.

Project Collaboration

One of the biggest challenges that every organization faces when it comes to project management is how to achieve collaboration across various business units. The nature of projects is that they usually require the input of various departments in ways that do not conform to the established organizational structure.

A project management committee can function as a separate organization within the organization. In order to reduce the risk of dysfunction in Tsingtao’s Thailand project, the company took the following measures.

First, the company assigned one of the senior vice presidents the role of project manager for the Thailand project. This VP will be the first president of the Tsingtao’s’ Thailand brewery. The Board felt that making this VP the project manager would give him the opportunity to understand the Thai business environment.

Secondly, the board decided to reduce red tape in decision making by making the project management team directly answerable to the board. This makes it easy for the team to make decisions independently away from the bureaucratic processes that plagues many business decisions The board only tracks the overall performance of the team in regards to the objectives of the project.

The third aspect of this project is that the board enlisted the help of the Internal Audit Department to keep an eye on the expenses of the project. However, the audit team can query expenses that fall out of expectations. The Internal Audit Department, then reports its findings to the board for further action.

The PMO on the other hand analyses all reports presented by the project manager on behalf of the board. The board then makes decisions based on the reports presented by the PMO and the Internal Audit Department.

Role of Organizational Culture in Project Success

The organizational culture of Tsingtao is playing a very important part in the development of this project. Internally, Tsingtao has a global mindset because of its international clientele. Tsingtao works well with people from other cultures in its marketing chain.

The company’s German heritage gave it an international focus on business. The company does not look at itself as a Chinese company, but as a brewery operating in China. This explains the decision by the board to move some operations to Thailand in order to serve its customers better.

Despite the internal perception of the company’s identity, the company operates within a Chinese cultural context. One of the visible impacts of Chinese culture in the operations of the project management committee is the choice of the senior VP to head the Thai project.

The Chinese culture stresses seniority when it comes to promotions and during hiring. In addition, staff members hold seniors in high regard because of the cultural heritage of the Chinese people. The board is sure that the senior VP will have complete control over the project because of the respect the other project team members accord him.

In addition to these cultural aspects, the Chinese power structure usually works around centralised controls. The senior VP is an organizational insider. The board is therefore comfortable with him at the helm of the new operation.

The Iron Triangle

The success of this project depends on the ability of the project team to deliver it within the scope, cost, and schedule. The scope of the project is non-negotiable. The project management team must deliver the project exactly as designed for it to meet the project’s objectives. On the question of cost, the team can find cost effective options in the design of some aspects of the project.

For instance, the project management committee can find large rice suppliers and sign supply contracts with fewer people. This option will save on the cost of organizing large-scale meetings with many smallholders. However, the company will need time to find these cost effective options.

The schedule of the project is flexible and is not entirely in the hands of the project committee. For instance, the company cannot force the Thai authorities to process permits faster than usual. The company must wait for the authorities to act.

ICT Resources Assessment

The three main types of ICT resources useful to this project include project management software, teleconferencing facilities, and internet banking. The project committee needs project management software to schedule tasks and to keep track of progress. The project can also benefit from collaboration software to ensure the team is in touch at all times. This will cut the costs of physical meetings and will save time.

The project management team and the board can have meetings via teleconferencing facilities. This will cut out the need to travel between Thailand and China for board meetings. This will also save on time and cost for the project.

Thirdly, the project management team will benefit from the internet banking facilities because of the need to transfer funds between China and Thailand to finance the operations of the project. Currently, there are many options available for international funds transfer. Some of these options require regulatory approval.

Retrospective Project Plan

The diagram below shows that network diagram and the critical path for this project.

Network Diagram

Figure 1: Network Diagram

The tasks, detailed in the network diagram are as follows. The tasks listed in red show the critical path of the project.

Start
Architectural planning
Land survey
Obtaining of construction permits and regulatory approvals
Retaining contractors
Construction phase
Market analysis
Market segmentation
Branding decisions
Development of marketing objectives
Action plan
Identifications of rice suppliers
Identification of product distributors
Obtaining trade licenses from government
Obtaining permits from alcohol regulators
Environmental assessment
Identification of service contractors
Handover of construction project to the company
Marketing research
End

Risk Management Plan

Risk Identification		Risk Assessment	Risk Control Strategy	Risk Communication
Cost risks	Project costs exceed projected budgets	The Internal Audit Department informs project team of cost overruns	Strict budgeting practices Careful monitoring of expenses	Internal Audit Department to send audit reports to project teams at least weekly Project team to communicate any projected overruns to the Internal Audit Department and the Board.
	The arising of unplanned expenses	The project management team finds required expenses that are not included in the project budget	Project team carries out projections to determine beforehand the risk of such expenses arising	Project team communicates to board for approval of funds Project team communicates with the Internal Audit Department on risk
Schedule risks	Delays in licensing	Project team finds out in the field that licensing takes longer than planned	Find out from chambers of commerce, and from other Chinese firms in Thailand how long it takes to process licenses	Project Teams to communicate risk to board
	Delays in funds transfer	Delays caused by regulators to approve the transfer of funds to Thailand	Apply for all necessary approvals in advance	Communicate to the board need to early application for funds transfer approvals
	Delays in delivery of project components by contractors	Contractor reports to project team about delays in delivery of the project	Allow delays in the project plan deliberately so that slack covers any delays Carefully track the critical path	Project team to communicate to the board about any delays
Scope risks	Need to expand scope of works to cover unforeseen construction needs	Project team receives reports from contractors about the need to expand the scope of works	Carry out evaluations of all processes to identify any emerging risks	Communicate to board any projected expansions in scope of works

Table 2: Risk Management Plan

Evaluation of Project Tools and Methods

The following table summarises various project management tools and methods, alongside their benefits to this project.

Tools and Methods	Benefits to the Project
Microsoft Project Software	Microsoft Project is beneficial in project scheduling and monitoring. It is also beneficial in resource planning and tracking. It also helps in the development of Gantt charts and network diagrams.
PMO	The PMO will help in the maintenance of project standards
Work Breakdown Structure	The Work Breakdown Structure lists all the lowest independently manageable tasks required to deliver the project.
Iron Diagram	This diagram is useful in conceptualizing and managing project constraints
Risk Management Matrix	The Risk Management Matrix helps in risk identification and in developing a risk management strategy.
Network Diagram	The Network Diagram is useful for showing how tasks relate to each other and in identifying the critical path of a project

Table 3 Assessment of project management tools and methods

Conclusion

This success of the Tsingtao project in Thailand will depend on the use of robust project management tools and methods. The project enjoys strong support from the Tsingtao board, which is a critical requirement for the success of any project. However, the project will require careful implementation because of uncertainties inherent in establishing a new business in an unfamiliar business environment.

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