DIOSCURI
FIELD I
- CASE 3
Entrepreneurs
Croatia, Zagreb 2006
Davor Topolčić
Institute of Social Sciences ‘Ivo Pilar’
Zagreb, Croatia
e-mail: Davor.Topolcic@pilar.hr
Research project:
‘Eastern Enlargement – Western Enlargement.
Cultural Encounters in the European Economy and Society
after the Accession–DIOSCURI’
Field 1 Case 3
Analysis of the restructuring process in Croatian companies
taken over by a Western investor
The Croatian brewing industry: Case study of two breweries
Zagreb, January 2006
1
Contents:
1.
Introduction ……………………………………………………………………………………… 3
1.1.
The Croatian beer market ………………………………………………………………………… 4
2.
Methodological remarks ……………………………………………………………………… 7
3.
Case-study Company 1 ………………………………………………………………………… 9
3.1.
3.2.
Basic data about the Karlovacka pivovara (Karlovacka brewery) …………………… 9
Ownership transformation and first encounter ……………………………………………… 10
3.3.
Second encounter – take over by Heineken and expectations …………………………… 13
3.4.
Culture encounter and the time frame of changes
3.5.
Outcome of the encounter ……………………………………………………………………… 21
4.
Case-study Company 2 ……………………………………………………………………… 22
4.1.
Basic data about Carlsberg Croatia (ex Panonska pivovara)……………………………… 22
4.2.
Ownership transformation and culture encounter ………………………………………… 23
4.3.
Outcome of the encounter ……………………………………………………………………… 28
5.
Croatian vs. the “Western” economic culture ………………………………………… 29
6.
Conclusions ……………………………………………………………………………………… 31
2
……………………………………… 16
1. Introduction
The story of cultural encounters in our case study is the story of a long tradition of
cultural encounters. The history of Karlovacka pivovara (Karlovacka brewery) in the 19th and
first half of the 20th century is connected with owners of foreign nationality. After an initial
period of 50 years marked with discontinuity in production, when a few different owners tried
their business luck, the story of success begins with the employment of young foreign beer
expert. In 1908 new technical director, Wambrechtshamer, brought new expertise from
Germany and Austria with a considerable effect on quality and sales of beer. Mr.
Wambrechtshamer later becomes one of the owners of the brewery.
On the other hand, Carlsberg Croatia does not have such a long tradition. It was
established in 1971 as the Panonska pivovara (Panonska Brewery). At first it was a part of a
big company Podravka from Koprivnica and, later it became a daughter company of
Podravka. In agreement with the licensing contract, the Tuborg brand was presented to the
Croatian market in 1972. That involved compliance with strict standards of quality and a
prolonged period of (limited) exposure to the Danish/Western business culture.
Ownership transformation in both breweries started in the first half of the 1990s, with
a different pace and, ended in the first half of the 2000s. The process was faster in case of the
Karlovacka pivovara. In 1994, a majority shareholder in the Karlovacka pivovara became the
Southern Breweries Establishment. As of April 2003, Heineken is the majority owner of the
Karlovacka pivovara. Foreign capital moved in the Panonska pivovara at a slow pace. Since
1993, Carlsberg Breweries has been a minority shareholder in the Panonska pivovara. In 2002
Podravka sold its shares and Carlsberg Breweries became the majority owner of the company.
In the case of both breweries included in the research there is a prior history of cultural
encounters with the Western business culture before ownership transformation and, since
ownership transformation in 1994 there was almost a decade of the greater or smaller
influence to blend in a Western way of doing business. Second, the economic position of both
breweries was less than good, marked with an unsatisfactory/stagnating position on the
Croatian beer market. So, in both breweries employees welcomed the take over because the
new owner’s good reputation and hope for improvement of economic/beer market position of
the brewery.1 Third, foreign managers from Heineken and Carlsberg sent to resume a leading
position in the breweries were managers with respectable international experience and they
came reasonably well informed about the Croatian beer market and the brewery. The mothercompany also made certain that they had a short introductory culture course about Croatia.
3
All that prepared the stage for the take over by leading players in the world beer
industry; it minimized culture shocks and eliminated any possibility of persistent “clashes of
civilizations”. The mental baggage was light in terms of preliminary expectations by the
actors concerning the cultural specifics of the other side. The sequence of the encounter
deviates from the main hypothesis of the DIOSCURI project about the process of cultural
adjustment that follows the sequence: the original expectations – tensions/frictions/conflicts –
coping strategies – final compromise. In that sense the sequence of the culture encounter is
irregular and the process of cultural adjustment was rather easy-going, causing very little
friction and tensions between partners at management level.
As the rest of the study will show, similarities between these two breweries end at the
shop floor level. Karlovacka pivovara is the bigger brewery with older technology and to
achieve corporate (Heineken’s) level of quality, productivity and profitability a larger scale
process of restructuring was launched, with substantial investments. This, still on-going
process caused various tensions and frictions with some interesting coping strategies and
compromises. Carlsberg Croatia is a smaller brewery with new technology and that made
transition to corporate standards of doing business and corporate culture easier.
1.1. The Croatian beer market
After the war for independence 1991-1995 ended and inflation was put under control,
economic growth has been slow but steady. Generally, such economic circumstances are
favorable for the beer market growth as well as for growth of demand for premium beer. Per
capita consumption of beer varies between 74 and 82 liters. Recently consumption of beer has
fallen down – in first 9 months of 2005 beer market sales was approximately 5% smaller then
in comparative period in 2004. This is attributed mainly to restrictive legislation since the end
of 2004, which prohibited any consumption of the alcohol for motor vehicle drivers (so called
‘The 0‰ law’).
4
Table 1
Beer production in Croatia (hl)
Location of 2004 Production 2005 Production Index
the brewery January - July
January – July
*Karlovac
531539
554684
104
Zagreb
975048
922373
92
Split
173566
144506
83
*Koprivnica
260355
263966
101
Daruvar
50476
51862
103
Osijek
131945
124943
95
Buzet
47703
41205
86
Total
2190312
2103539
96
* breweries included in a case study
The Croatian beer market was / is not complex or fragmented market characterized by
heavily competition. We have only three big breweries, which operate on a whole national
market and export beer, four regional breweries and a few local microbreweries. Additionally,
a market is not saturated with imported beer. A set of brands of the imported beer is rather
limited and in most cases too expensive for an average Croatian consumer. In a way this was
‘easy’ market, attractive to be captured by the leading brewing groups in the world. On the
other hand, The Croatian beer market is specific in a sense that it is regionally segmented and
every brewery holds largest segment of the market in the region where is located. E.g.
Carlsberg Croatia holds 60% of beer market in its own region.
Croatia is no longer marked by highly unstable economic environment, but rather
frequent changes in legislation represent certain risk factor. Factor of the financial risk,
nonspecific for beer industry is the problem with the financial discipline, overdue debts and
inefficiency of the legal system. E.g. in 2003 Karlovacka pivovara had to file in the local
courts the law suits in total amount over 1 million EUR because of overdue debts for sold
beer. And it was not clear how much of that money will they eventually get because of the
insolvency or bankruptcy of the debtors. In a document (‘Kratki prospekt’) about Karlovacka
pivovara of the Varazdin stock exchange, change of tax legislation was singled out as
important system risk encountered in the recent past, especially change of profit tax and
increased rate of special tax on beer. In a newspaper interview Mr. Pedersen, Managing
director of Carlsberg Croatia, also commented ‘extremely high special tax on beer’ as factor
5
that limits organic growth of the beer market. The other limiting factor is so called ‘0‰ law’
which prohibited any alcohol consumption for drivers of the motor vehicles.
Today the largest shares of The Croatian beer market have three breweries in foreign
ownership, all being a part of the 10 world biggest brewing companies – Inbew, Heineken and
Carlsberg. Presence of influential players on the international beer market has hardened
competition on the Croatian market.
Indeed, after Heineken became the majority owner of the Karlovacka pivovara in
2003, in one of his first public statements President of the Management Board Mr. Ypma
pointed out two major goals of the brewery: to strengthen the brands of Karlovacko and rise
of the profit. On the press conference later that year Mr. Ypma as a goals of the new owner,
Heineken, singled out the increase of the Croatian beer market share (than holding 19%) and
gaining the leading position on beer market.2 In 2005 the market share increased to 22% and
new President of the Management Board Mr. Schoevers follows the same goals of his
predecessor. The other brewery in which we conducted research, Carlsberg Croatia very
effectively achieved goal of the increase of the market share. In relatively short period of
three years they increased beer market share, from 6% to 15% of the Croatian beer market.
Success is even bigger because the reduction of the domestic beer consumption in 2005.
For such ambitious companies that market is rather limited and highly dependent on
the economic power of Croatian consumers. That means growing importance of the export for
further business expansion. We expect that in future these two breweries will become
important regional players. These two breweries as a part of the leading brewing groups in the
world must accommodate to the Group’s standards of acceptable/planned profit level.
Generally, in the leading brewing group underperforming is tolerated for a short period of
time – e.g. in year 2005 Carlsberg announced closing down 15 breweries.
Croatia started negotiations for full membership in the European Union. A perspective
of being a part of the European common market means that Croatian beer producers have
couple of years to prepare to face much harder competition on domestic market, as well as to
look beyond national boarders for expansion. Breweries owned by world leading beer players
will face that challenge more easily than other Croatian breweries.
6
2. Methodological remarks
Getting approval for conducting a case study was main problem, combined with a long
negotiating process. Maybe not so paradoxical, longest negotiations were with the brewery
that eventually turned us down. From the business point of view reluctance to disclose
internal processes and dynamic to the eye of public is understandable. Nevertheless that had
unfavorable repercussions for our case study. First, we were forced to change planed design
of the study – instead one case we have two. Second, instead planed 15 interviews we made
additional two – total of 17. Developments in the negotiations to get approval for
participation in the research directed us to include in the research respondents from two
suppliers companies. So, in one brewery we made 8 interviews, in other 7, plus 2 interviews
with the suppliers.
Modified design of case study has both advantages and liabilities. With reduced
number of participants we were not able to get such deep and detailed insight in the case as
we wanted. Second, we did not choose our respondents – we were offered to interview mainly
their senior managers and couple middle level managers. That gave us insight in a view from
the top of organizational pyramid and left us without the view from the bottom of
organizational hierarchy. We expect that ‘rank and file’ employees and their immediate
supervisors have a little bit different perspective on cultural encounters, especially in the light
of the group layoffs. Fluctuation of workforce happened also at managerial level, so we talked
with (satisfied) survivors or with the newcomers. In interviews with managers who joined
company in a recent past we had to skip the question about original expectation after takeover. Instead we asked them about positive or negative surprise after they joined the
company. Third, in Carlsberg Croatia all interviews had to be made in a presence of the
Public Relations manager and in agreed time of 30 minutes. We are certain that it posed
additional impulse for self-control and certain auto-censure at the side of managers
participating in the research. That also caused difference in quantity of gathered interview
material and put Karlovacka pivovara in focus of this case study. On the other hand,
experience in two companies taken-over by leading players in the world beer market allow us
to better understand the world of big corporations and to make certain comparison between
these two cases. In a way corporate cultures and practices are quite similar.
The Croatian beer market leader Zagrebacka pivovara, owned by Inbew, turned us
down after a month and half time of intensive business correspondence. Karlovacka pivovara
was chosen also because during an ACCESS project in 2003 we already made two interviews
7
with leading managers and we got certain insight in the company. In April/May 2005, through
business correspondence and personal contact with one of the directors, researchers explained
the scope and methodology of the project. We came to agreement with Mr. Schoevers, the
President of the Management Board of Karlovačka pivovara that we can make 10 interviews.
In May, we had scheduled interviews with four members of the senior management, starting
with the President of the Management Board. Before we started interview Mr. Schoevers
informed us that he changed his mind and that we have the permission for only four
interviews. Explanation was that four interviews are quit enough to get insight in the
company. It took over 3 weeks of “lobbing” to get the permission for additional 4 interviews –
total of 8 interviews. Some managers from the list were on the vacation and than too busy –
beer production/consumption is highest during hot summer. We also took break for a summer
vacation, so the last interview was made in September.
In Karlovacka pivovara negotiations ended with a half of needed interviews, so in
order to keep up with the timetable of the DIOSCURI project we decided to try to include in a
study Carlsberg Croatia, another brewery taken-over by foreign investor. In that case we
would have second and third ranked brewery on the Croatian beer market. The negotiations
with Carlsberg Croatia were successful but as the summer is the peak of the business circle
for the breweries, 7 interviews were arranged to take place in the first days of September.
Than we were faced with a month of delay because of sort of audit from the Headquarters and
because of finishing business plans for next year. In September we managed only to make an
interview with the Mr. Pedersen, Managing Director of Carlsberg Croatia.
To reduce uncertainty and to broaden a scope of our study in a meantime we made two
interviews with managers from two companies, which are main suppliers of the Croatian
breweries and have business experience with both breweries included in the study. So in
September we made interview with the commercial director of Slavonija slad and with the
director of marketing and sales of Vetropack Straza. The first company is Croatian main
producer of the beer malt and the second is a big producer of the glass bottles. Both
companies are in majority foreign ownership and, a part of big European corporations. In
October we made 6 interviews in Carlsberg Croatia and finished the field work.
Note: Our respondents from Karlovacka pivovara are coded from H 1 to H 8, and from
Carlsberg Croatia as CC 1 to CC 7. We didn’t try to protect identity of the head manager (the
President of the Management Board/ the Managing Director) in these breweries.
8
3. Case-study Company 1
Karlovacka pivovara - Heineken
3.1. Basic data/facts about company
Brewery has a long tradition, since 1854. It is located in Karlovac, city on four rivers
in the central Croatia. City has well developed traffic connections – railway and motorway.
Distance to capital city is only a half hour drive on the motorway. Motorways also connect
city with Rijeka and Split - two major harbors and regions by the Adriatic coast. Today,
Karlovacka pivovara is the second leading brewery in Croatia and the biggest beer supplier of
the Croatian tourist area. It is also the largest Croatian exporter of beer. Karlovacko beer is
been exported in Australia, Austria, Canada, Germany, Switzerland, Sweden, USA, Slovenia,
Bosnia and Herzegovina. The product range of Karlovacka pivovara includes four brands of
beer, but lager (5.4% alcohol) makes almost 90% of production. They distribute brands
Heineken and Desperados and, in 2005 also started the distribution of some additional beer
brands from Heineken family.
In 2005 Karlovacko lager beer won gold medal The Brewing Industry International
Awards as best lager in the category with 4.4% – 5.5% an alcohol content, in the competition
of 133 lager beers across the world. This is the first time that a Croatian beer has won this
award. Over the years the Karlovacka pivovara received other awards for quality of the beer –
e.g. Monde Selection in 1983, 1984, 1985, 1990, 1992 and 2004.
Table 2
Karlovacka pivovara - Basic data/facts (2004)
Number of employees:
565 (currently 517)
Newly opened jobs:
24
Net revenue:
509.809.403,28 HRK (kuna)
Profit before tax:
56.222.235,07 HRK (kuna)
Share of export in net revenue:
22,10%
Average net salary:
6.650,98 HRK (kuna)
* Exchange rate
1 EUR ≈ 7.4 HRK
Source: www.croma.hr
9
3.2. Ownership transformation and
the first encounter
In 1992 Karlovacka pivovara became a join-stock company owned by its employees
and state, i.e. Croatian Fond for Privatization (35%). In 1994 state sold its shares to the
Southern Breweries Establishment (SBE), a member of Luksic Group from Chile. Its owner
was Androniko Luksic, a Chilean of Croatian origins. Next year SBE make public offer to the
small shareholders and become the majority owner of the brewery with 68% of the shares.
From 1.1.1996 duty of managing director took over a manager from the Chile, and manager
from Germany, ex-employee of Paulaner took control over production. Some people from the
Karlovacka pivovara were sent on study visit to Paulaner and there was established
cooperation with one University in Germany.
Nevertheless, that was not best choice for the company. In period 1996–2003 brewery
came in a phase of stagnation and loosing market positions. Beer production fell from
approximately 1,100,000 hl to 800,000 hl. Several reasons caused such unfavorable
development.
That was primarily result of the insufficient investment and some wrong moves in the
choice of the technology. Low level of investment is consistent with the opinion about
speculative nature of acquisition – buy chip and wait till the price go high. A fact that at the
time of gaining the majority ownership Mr. Luksic has had good connections with the ruling
political elite, including late president of the Republic Mr. Tudman, strengthened that opinion.
Although Croatia in 1994 was still in the war for the independence (it ended in 1995), public
opinion about that case of privatization was negative, especially in local community. People
and employees of the brewery resent that SBE got it cheap. That undermined the authority of
the new owners and expatriate managers in the eyes of the employees. One of the managers
said that because of that expatriate managers from Chile, in certain extent, have been treated
as if they were not foreign managers. Nevertheless, the authority of managers got stronger and
work discipline has been improved.
“First stress was the transformation from the socialistic system (into a join-stock
company) – the war itself already caused introduction of the higher discipline in
management process. …a little bit more separation of the management team (from the
rest of employees). Normally, it become clear to everybody that authority of the owner
10
is something different than it was authority of the General director in past times.
Instantly change in the work discipline happened.” [H 2]
According to the same respondent, another unfortunate moment was dissolution of successful
management. Some members went to retirement in a short period of half of year or one year.
According to the view of manger with the long tenure in the brewery all replacements in the
team were not adequate. As a positive aspect of take over one respondent point out that
decision making process get simple and the business objectives were clearly defined:
It was known: owner wants this and there were no big discussion about it. So, the goal
was better defined – before there were more different goals, interests. In some way it
was easier because you didn’t have to think whether will you satisfied number of
interests.[H 6]
Three managers from Chile were rotated on the place of managing director of the brewery.
That undermined continuity in managing, because each one of them needed certain time to get
complete picture of the situation in the brewery and to adjust to the local circumstances.
Managing director had his goal and often happened that in order to fulfill these goals
sometimes moves were made which we would not. … Maybe that role of planning and
determined budget sometimes was treated like the Holly text. [H 6]
Our respondents were somewhat reluctant to speak about that period. It was rather bad time
for the brewery and probably is not best business custom to speak about it.
It’s always easy to have negative comments on someone after he’s done a job. [H 1]
But we managed to squeeze out from our respondents that leadership style was also a
problem. One of the senior managers said off the record after the interview for ACCESS
project in 2003:
“We were treated as natives, as Indians!”3
Apparently that was more or less general opinion of domestic management because we heard
same phrase two years later from the other respondent:
11
“With these directors from Chile I had kind of feeling like: We are Indians. They
were, if you can understand what I mean, like characters from the Mexican soapoperas.” [H 5]
In a moment of privatization in the brewery were employed approximately 870 people.
During socialistic era political pressures and/or personal connections often overruled criteria
of the economic rationality regarding employment of new labor. Logic was:
“Where is place for 100 employees, there is place for one more.” [H 2]
Naturally, the process of the restructuring started and changes did happen. Number of
employees in production fell down. Reduction of the workforce was ongoing process.
According to document of the Varazdin stock exchange total number of employee in the
brewery in 2001 was reduced for 24 employees and for 82 in 2002 and new employees were
not hired for that jobs. At the same time a big increase of employees in commercial
department happened. The new owner also made changes in the organizational structure.
Once a commerce sector in the firm was sector that included supply, sales and
marketing, all together. And when they came that was separated. [H 8]
Changes also included the bigger budget for the marketing. Logic – It is harder to make a
beer than to sell it – was suddenly reversed. And that was time of learning:
Concretely, all of us in the marketing, we were than start learning from the beginning.
[H 8]
As we explained Karlovacka pivovara is brewery with a long tradition. But as we were told in
a previous interview in 2003, the new owner did not fully appreciate that tradition. An
example is the bottle label redesign. Neither they were trying too much to change negative
image in local community and to improve relations with the local community.
And we could conclude that all these changes were not sufficient to keep leading
position on the Croatian beer market. Before privatization in most successful period
Karlovacka pivovara gain position of the market leader with 31% of the market. Instead
business expansion loosing a market position happened – market share drop on 20%. And for
employees that encounter with Latin American type of Western business was not pleasant
one. First line and middle managers didn’t like autocratic style of leadership, workers were
laid off and company was stagnating.
12
3.3. The Second encounter
- take over by Heineken and expectations
In 2003 Heineken bought shares from the Southern Breweries Establishment and
became the brewery's majority owner (68%). Later Heineken announced public offer to the
small shareholders. The offer was financially attractive and Heineken Group becomes owner
of 96% of shares of Karlovacka pivovara. In one-month transition period President of
Management board was Ton Bluem, whose special duty was to finish take-over business. The
reaction from local community was very positive, as an anecdote which one manager told us
show:
Heineken bought brewery at Tuesday. At Friday many people commented that beer is
now much better. [H 2]
Various actors – from the local administration and some other institutions, and professional
association – also very positively saw take over:
O, you are very fortunate, Heineken bought you. [H 2]
In May 2003 Mr. Ypma become the President of the Management Board. As his short CV
shows he is experienced manager and he already had encounter with “Eastern” business
culture. Previous experience from Poland and good knowledge of region prepared him well
for current job in Croatia. And what he did not mention, Heineken have also a program
designed to prepare managers for a job in a foreign country.
Alle Ypma joined Heineken 24 years ago and he has longtime experience as manager
on the various positions. He participated in Heineken’s expansion in the regions of
Eastern and Central Europe. His last duty was position of the President of the
Management Board in brewery Zywiec in Poland, in period of last three years. He is
60 years old and he was ready to retire, but he accepted offer to took over
responsibility for Karlovacka pivovara.
The reaction from employees on take over was also positive. When we talked about
expectations about Heineken as the new owner of the company it’s all about great
appreciation of such big company and hopes that Karlovacka pivovara has better future with
the new owner. Positive expectations and atmosphere were obviously high and newly
appointed President of the Management Board, Mr. Ypma, in one newspaper interview
13
(14.5.2003) felt need to say the words of caution. He said that the name Heineken would not
solve all the problems by itself.
For a period of roughly one year Mr. Ypma was the key actor in this second cultural
encounter. His business goal was to substantially increase share in the domestic beer market
and his mission was to implement Heineken’s business systems in the brewery:
“A number of Heineken policies articulate our business principles in greater detail. These
provide clear parameters within which all Heineken companies must operate at a local
level.”4
One local manager with the long tenure in the brewery helped him in relations with various
business partners, local administration, etc.
It is important to know (right) people to get things done – it functions as a network.
This is not a feature only of Croatia ... Foreign managers should use advantage of the
local managers when it comes to know how system is working. [Ypma, ACCESS
interview, 2003]
Generally, Mr. Ypma negatively valuated such business practice/situation but he adapted to it.
On the other side, local manager had much positive view on this situation - he is imagining in
what kind of situation he would be as expatriate in the Nederland:
I would not know customs, relations between people. I wouldn’t know if I should
receive somebody who did call me or not, is it a mistake or is it usual. … considering
fact that I live in this town for 40 years and work in the brewery 37 years and, because
of my good position (as manager) I have good relationship with all institutions… (I
got) this special assignment to keep relationship with the local administration, town,
country, business association of beer industry, with other breweries. So, if we need to
establish some contact regarding some business matter I do it, with various
government ministries, etc. I connect directors on economic, business or cultural plan.
… I suggest on which manifestations is good for us to appear, should we sponsor some
sport or financially help to town. [ACCESS interview, 2003]
Mr. Ypma started the process of the restructuring of Karlovacka pivovara with the objectives
to achieve more efficient and concurrent organization. That included upgrading and
improvement in production and, especially improvement in the systems of planning, financial
analysis and information technology. According to that plan in next 5 years Heineken will
14
invest 200 millions kuna (over 27 millions EUR) and the number of employees will be
reduced from 568 to 517.
So, after some time satisfaction with the take over was more differentiated between various
departments inside brewery – depending on how the process of reconstructing has been
reflecting on them:
Simply, a fact that Heineken bought us had the positive effect on our image as
brewery. … Especially our people in the Sales department, who are in the direct
communication with the buyers, felt the positive atmosphere. But, in the Sales
department there was no lay offs, so there was not a negative atmosphere, which was
maybe present in production. [H 8]
One of his first moves of Mr. Ypma was to increase salaries for 2.1%. In that way a signal
was sent to employees that they should expect better days and that the new owner respect and
encourage work efforts.
15
3.4. Culture encounter and
the time frame of changes
The authority of corporation makes implementation of changes easier, with the less resistance
or conflicts. In an anecdote manner manager with long tenure in company point it out:
If, for example, I would say before 10 years to this people: You cannot drink, they will
kill me. But when you came from abroad, from Heineken – that’s OK. It is normal.
[H 2]
The process of examination of fit between every job place in the brewery and employee on
that job was put in the motion. Bad news was planned lay off of 87 workers.
We looked into how new organization should look like, what kind of skills are needed
on the people in that new organizations. Than we looked: OK what kind of skills
current people have, can we train them, can we improve it to get them in the new
organization? That’s what we wanted as much as possible. Or, individuals will also be
there who for a good reasons have never learned those skills, the basics maybe of
computer skills … Than we see – it’s not trainable. OK, that’s our fault not their fault,
but you must separate. That’s what we did in the restructuring. And we had therefore
created a package which is much higher then required …[H 1]
Heineken as generous employer offered to workers those who do not fit in the new
organizational schema monetary compensation that is 3 times bigger than compensation
subscribed by the law. Additionally it is offered by company to organize for them courses that
will increase their human capital – basic computer skills or foreign languages. Mr. Ypma also
expressed readiness of the company to mediate between that workers and employment
agencies in Zagreb.
Reduction of the workforce was continuation of the process started by the former
owner of the brewery. It was conducted on several different ways. Lay off is the one. Some
workers went to retirement and some were encouraged to accept early retirement. And
another mode of reduction of manpower was complete privatization of some organizational
units, which were not the core business. That process is not over yet. All sorts of maintains
services were taken out of the organization structure of the brewery – e.g. auto mechanic
workshop, locksmith workshop, cleaning services, etc. Some of former employees were
encouraged to start their own business enterprise and to sell services to the brewery. On that
16
manner nobody would loose a job but they would be no longer employees of the brewery. For
instance now brewery don’t own transport vehicles or vehicles for internal transport inside
brewery. Today vehicles for internal transport have been rented from the firm owned by
former brewery employee.
“I guess that next step will be to transfer all (30) drivers of these vehicles into that
firm, what is logically.” [H 2]
Economy logic is simple and says that this is double gain: brewery does not have to worry
about maintaining these vehicles and therefore there is no need for maintains personal and,
they are cutting down business expenses on workforce:
“The brewery will reduce workforce, but these 30 workers won’t loose the job – the
other question is will they have salaries as in the brewery.” [H 2]
In the structure of organization multifold changes occurred. First and most obvious, the names
for certain positions in the organizational hierarchy have been changed, e.g. technical director
become production manager; general director now is President of the Management Board,
etc. This is simple case of alignment with the organizational structure of the mother company.
But behind the nominal changes more important is enlargement of the top management team.
During socialistic period in medium size companies usually there were only three or four key
managers – general director, technical director and commercial director. During the process of
the restructuring, the new owners of the brewery enlarged the number of the top managers.
That reflects two shifts: recognition of importance of other departments in organization and,
not less important, certain democratization in the style of leadership.
Second, there was the process of organizational differentiation – some functional positions in
organizational structure were promoted into separate departments, e.g. department for the
human resource management is newly established. Some functional position before did not
exist, e.g. public relation manager. Before Heineken it was one of the duties of one of
employee in the marketing department and it was done on the reactive level. Some
departments were gaining on the importance and new jobs were opened. In 2003 Mr. Ypma
announced plan to hire 46 new employees, mainly for the Sales department.
In an interview for ACCESS project Mr. Ypma told us that one of important aspects of
Heineken’s way of doing business is Professional fact based management, which is based on
the achievement and not on the personal relations. That was new way of management in the
brewery. There is need for the higher work discipline, transparency in the communication,
17
honesty, integrity (promises should not be broken) and honest relationship with the
employees. Learned skills (e.g. leadership training) should be transferred to the middle
management. Also, for the middle management there should be organized training on the job.
Middle management had difficulty or was reluctant to use the authority because they were
part of the group – it’s a heritage of socialistic system of self-government. Mr. Ypma was not
quit satisfied with the accomplished changes on that aspect of management.
It is also obvious that Heineken invests a lot in the people. For Mr. Ypma employees were a
key factor in a further development of the company.
… more attention is given to the education of employees, a lot more than previous
owner. Form learning basic computer skill or some advanced computer knowledge to
learning foreign languages – this year that was accessible for all employees … [For
managers were] programs for managing crisis situations, teamwork. [H 8]
In 2004 Erik Schoevers was appointed as new President of the Management Board of
Karlovacka pivovara. Mr. Ypma became a member of the Supervisory board of the brewery
and in that way his experience from the Karlovacka pivovara is still useful for the brewery
and corporation. Before Mr. Schoevers came to Karlovac he was reasonably well informed
about brewery, market and Croatia.
Cultural course at (Laiden?) university, they organize two-days individual course, so
they invite people, for me there were invited people from Croatia. Very complete twodays program. … it is essential that partner knows what to expect from the country,
what is there, what is not there. It’s very much important to manage the expectations.
[H 1]
His short CV shows that Mr. Schoevers is very experienced and successful manager who
made career advancement very quickly in a corporate world of Heineken. At the time of
interview he was 38 years old.
Erik Jan Schoevers, born 1966 in Eindhoven, Nederland. He completed postgraduate
study at University in Groningen and received MBA for economy. He started career in
Procter&Gamble, first in Europe and then in Asia as marketing manager. He
continued his work as President of the Bakrie & Brothers Company. In 1998 he joined
Heineken Multi Bintang in Jakarta, Indonesia. He started as Commercial manager
and worked in different sections in marketing and business development. He had
18
advanced quickly to the position of Development Manager in Heineken Asia Pacific.
From post in Singapore he was covering the whole Pacific region from New Zeeland,
Australia, Japan, China to India. In 2004 he took over place of the President of the
Management Board of Karlovacka pivovara.
He resumed a course of the restructuring set by Mr. Ypma but he came very determined to
make another step forward in reshaping brewery. And he puts a lot of energy in his job.
Came roughly one year ago. Since then, working 24 hours on this job. … I knew for
already some time that I would go to Croatia, because here is important market for
Heineken and we invested a lot of money here when we took over the brewery. We try
very hard to grow. We are not there yet. So therefore Croatia very much fits my
personal goals. [H 1]
Nevertheless Croatia and Karlovac have certain specific features.
It’s different way of running a business. Here you have to go step by step. Contact with
a local community … to get induce new way of thinking… There are a lot of things to
be done. [H 1]
Mr. Ypma told him that people mentality is very much local and not yet internationally
oriented mentality at a present. So, he put as a priority to change a lot mentality of the people
– to wining mentality. And he started new cycle of evaluation of employees. Some employees
did not fulfill expectations – whether their work qualities were wrongly evaluated or it is a
problem with motivation – and they had to be replaced.
With a people that we currently employ we really make now a wining team. So this is a
first priority, very important subject – people. … Than you also have vacancies –
because you have in new organization positions which can’t be filled with your
current people because nobody fit in that. So therefore we have to recruit from
outside… last year, a quit a lot of people coming from outside KAPI.
[H 1]
The process is not over because after they have a right people in every job place they have to
adjust it to Heinekens system.
We got for all of them job descriptions. And that we now put that also in the Heineken
format … Practice (is): always you go local but use a global format. … we have to go
again through this all grading. So we, whole company becomes a part of the global
Heineken group. Let ‘s say every job here is in the system. [H 1]
19
He put a lot attention to the teamwork. One of his first moves was to take all first line
and middle managers to team building workshop. A positive byproduct of corporate education
– workshops and courses held in Vienna or Amsterdam is forming of international networks
of personal contacts between managers in different Heineken breweries. It facilitate theirs
communication and exchange of experiences. And of course there is an intense
communication with Vienna central that is in charge for this part of Europe, as well as with
Amsterdam Headquarters.
So I met people and I think that is very useful because I familiarized with their
practice. … and I think that Karlovacka pivovara is really one international company.
[H 7]
It was a lot of contacts abroad, and we have been pretty much integrated in theirs
(Heinekens) systems. Today it is on a daily basis (contacts). Literally we talk with the
central every day – I could call a colleague in Amsterdam and ask for some case as
example, ask for help. [H 7]
Except for some sectors which are specific for that country, like legal affairs and to some
extent sales, every other department or sector of the brewery is integrated in the network of
communication with the Headquarters in Amsterdam or regional in Vienna and with the
colleagues from other Heineken’s breweries in the region. All interviewed managers are very
pleased with such exchange of knowledge and experience.
(With the first owner) … we were an island, we were separated from them. It means
that from us was asked, I would say, only money. They didn’t pay much attention what
we are doing, how we are doing it (…) But, after Heineken took over I feel like a part
of some family. [H 5]
20
3.5 Outcome of the encounter
Alignment with Heineken’s corporate culture and business practices and, integration in
corporate systems is ongoing process. The process of the restructuring brought positive results
and it seems that “the wining team” is made.
I am very, very proud on my (management) team. We share openly things, people
show different ideas and work on it. If something goes wrong we tell each other. [H 1]
Restructuring was harder for some employees – for those who are technology surplus or who
didn’t meet criteria of new organization of work, who are less adaptive/flexible and less ready
to learn and, for older workers. It can be expected that situation will improve in the future.
I think also as a result job satisfaction here in the company is high for certain
individuals, but is also quite low for some others. And our job is to get it high for
everyone. But you have to go through this process, you can’t speed it up. [H 1]
Actually, every time you buy a new equipment people are well aware that it’s going to
be the reduction of manpower and, that can result, in fact, with certain de-motivation.
Not just with a resistance, but you can’t get them to function as a team. … That is only
temporary. Ones when the restructuring will be done, I think there will be no more
problems.” [H 5]
New company organization is very much performance oriented and demands put in front of
all employees are higher then there were accustomed. On the other hand, employment in the
brewery has much higher benefits then in average Croatian company. And the local
community positively perceived changes made by the new owner of the brewery - Karlovacka
pivovara got Award for business excellence in year 2004 from Karlovac County.
Announced uncompromised approach to quality of products resulted in a first award for one
Croatian beer at The Brewing Industry International Awards - Karlovacko lager received gold
medal.
And Croma Business Academy also positively evaluated work of the President of the
Management Board, Mr. Schoevers. He received award as best Croatian manager in 2005 in
category Company owned by foreign capital.
21
4. Case-study Company 2
Carlsberg Croatia (ex Panonska pivovara)
4.1. Basic data/facts about company
The Panonska pivovara (Panonska Brewery) was established in 1971 as a part of a big
Croatian company Podravka. In March 2004, the Panonska pivovara became Carlsberg
Croatia. It is located in Koprivnica, a city in the northwestern part of Croatia, about 120
kilometers from Zagreb. City has well developed railway traffic connections and not so good
road connections with the rest of the country. One of the largest foreign investments in
Croatia took place in 1997 in order for the new brewery to be built. A new brewery has a
capacity of 550.000 hl and technology was and still is at the highest level distinguishing
Carlsberg Croatia as a one of the most advanced breweries in the region. Special care was
taken for ecology and this is the only brewery in Croatia which has a wastewater treatment
plant. Carlsberg Croatia is among the Carlsberg Group’s first members that obtained ISO
certificates. In 2004, it implemented the systems for quality and environmental management,
in accordance with the ISO 9001 and ISO 14001 standards.
Today, Carlsberg Croatia is the third major player in the Croatian beer market. Current
market share is 12.5 % but Carlsberg Croatia is the fastest growing brewery in Croatia.5 It is a
member of the “Club 200”, i.e. Croatian companies whose export exceeds 1 million $.
Carlsberg Croatia export 11,4% of total volume of sale – in Slovenia, Bosnia and
Herzegovina, Macedonia and, Hungary. The product range of Carlsberg Croatia includes two
brands that are distributed nationally, and two brands that are distributed locally. They also
distribute beer brands from Carlsberg family. They are proud that a lager beer Pan, the local
brand positioned in mainstream segment, in 2003 was the fastest growing beer brand in
Croatia.
Table 3
Carlsberg Croatia - Basic data/facts (2004)
Number of employees:
330
Net revenue in 2004:
≈ 350.000.000 HRK (kuna)
Sales volume:
440.000 hl
Average net salary (2005):
 HRK (kuna)
* Exchange rate
1 EUR ≈ 7.4 HRK
22
4.2. Ownership transformation
and culture encounter
Panonska pivovara became a daughter company of Podravka and in 1993, 20% of the
company was sold to Carlsberg A/S, Denmark (10%) and the Investment Fund for the Middle
and Eastern Europe, Denmark (10%). In 1997, foreign partners gain additional 40% share:
Carlsberg A/S 30% and the Investment Fund for the Middle and Eastern Europe 10%. So,
ownership structure was: 40% Podravka, 40% Carlsberg A/S and 20% the Investment Fund
for the Middle and Eastern Europe, Denmark. In 2002, Podravka sold its shares to Carlsberg
A/S. Today Carlsberg is majority owner of the brewery with share of 80% and the Investment
Fund for the Middle and Eastern Europe owns the rest.
Carlsberg has been an influential player on the international beer market for well over
a century. Currently, it is the seventh largest brewing group in the world. It produces around 9
billion liters of beer each year, sells beer on more than 140 markets and has over 31,000
employees. It has a wide assortment that includes Carlsberg, one of the most international
beer brands in the world and Tuborg, a well-known European brand. It has production
facilities in 90 locations in 45 countries.6 Our case study is focused on one of them.
The story of transformation of the Panonska pivovara into the Carlsberg Croatia is the
story of long period of exposure to the Danish/Western business culture. First contact was
made as early as in 1972, when Panonska pivovara started to produce Tuborg brand, in
agreement with the licensing contract. That involved compliance with strict standards of
quality and acceptance of organization of the production according to Danish brewing
practice. In 1990s, even as minority owner Carlsberg took care for professional education of
the employees of the company. Some were invited to Denmark for two weeks, attending
various training programs, or for couple days on workshops, etc. Managers of the Panonska
pivovara were to some extent integrated into Carlsberg’s network of corporate meetings.
When Carlsberg had only 40% share in the company, it behaved as owner and
Podravka didn’t. I was invited on all corporate meetings of Carlsberg regarding my
area of work, while Podravka did not invite me. [CC 5]
Next phase of culture encounter with Western business culture started when Carlsberg gained
40% share in the brewery. From 1998, Mr. Pedersen was the deputy of managing director of
the Panonska pivovara. Two finance managers were expatriates, commercial manager and,
marketing manager.
23
I could say that also before (the final take over), the work in Panonska pivovara was
very good on very high level … here in Koprivnica we can compare with some other
companies and … it was on one very high level because the contact with the central
(Carlsberg’s Headquarters) and there was exchange of the experience. [CC 7]
But that phase of encounter did not go without gaps and tensions between partners. The
problem was that partners, Podravka and Carlsberg – owners with the equal share at that time,
did not share same vision of development of the brewery and that reflected in disagreement
about business strategy and goals.
That period was somehow restraining because there was not too much agreement. It
was always problem while the decisions were made - Carlsberg preferred one sort of
business, Podravka agreed, or not. I think that drastic change happened when
Carlsberg bought that 40% and became a majority owner. Today that has been
drastically changed in order to make the decisions as quickly as possible, strategies…
There is no more voting, then one side is pro, other is contra…” [CC 3]
From 2002 and take over, some things are more transparent. We changed name, the
goals are clearer … [CC 5]
That also had negative repercussions for the business success of the brewery. The situation
was a paradox: you have the brewery with the most advanced technology and the business is
slowing down. In years 2000 and 2001 there was a big fluctuation of workforce. And maybe –
just as a pure speculation – it was not in the best interest of Carlsberg to put extra effort in
order to improve economic performance of the brewery at the time when it prepared the take
over of the same brewery.
After the take over, generally speaking, the pace of changes was not increased dramatically.
For instance, foreign manager did not instantly come to the leading position in the brewery,
but he was appointed the next year. In that sense it is understandable when one manger say:
You know, I don’t make division on the time before take over and after it. It’s hard for
me to think that way… I must honestly admit, that I didn’t experience some great
change or cut after they bought the company.… All other changes we induced slowly.
We got M.D. who is Danish and with his arrival some things had been changed.
[CC 5]
24
30 years long experience of doing business with Western partners well prepared employees
and managers for the start of process of integration in Carlsberg Group. Expectations from
Carlsberg as the new owner were simple and positive:
All our people perceived it in a very positive way. Because, we all experienced that
burden – we have two bosses (owners) who are disputing and, business is suffering.
When that transaction was over we had one boss. We all felt relief and we knew:
either we are going to make (business) success or not. And we did it, for now we are
successful. [CC 7]
Jorn Pedersen was named as the Managing Director of the Panonska Brewery on the 1st of
April 2003.
Jorn Pedersen worked as the Business Development Manager in Carlsberg Breweries
A/S, working with branches in Eastern Europe. From 1998, he was the deputy of
managing director of the Panonska Brewery. After that he was coordinating new
business transactions such as Carlsberg’s takeover of two Bulgarian breweries in
2002. In 2002, he became a member of the supervisory board of the Panonska
brewery, today Carlsberg Croatia. Prior to that, he worked in Malawi for four years.
So, Mr. Pedersen knew the country and the company quit well before he was deployed (again)
in Koprivnica. But he was surprised with two things. First, why Carlsberg didn’t either sold
the company or sooner intervened to make it profitable. And second, with the number of
disillusioned people who didn’t look for another job. The situation was very bed. Later he
realized that, beside high rate of unemployment in the country, there are two main reasons
why people stayed in the company – a loyalty towards the company and loyalty or attachment
to the local community. That prolonged bad business situation then had long lasting negative
effect on people’s attitudes.
“Big changes were needed. And what surprised me is that here is a hard to change
things.”[CC 1]
Although the changes were in(tro)duced slowly, and managers do not perceive them as
dramatic cut, many changes happened. Mr. Pedersen came determined to turn that regional
brewery with a lot potential into one of the leading players in the Croatian beer market. Main
thing he wanted to change is to make company profitable again. But, unlike his two
predecessors his strategy was not oriented on cutting the costs in order to achieve profitability,
but the increase of the revenue. As a goal he set revenue increase of 10%. That means also
increasing of the growth capital – the costs, especially for the marketing. That was surprise for
25
the employees and, that requires different skills then strategy of reducing costs. The process
of restructuring and the integration of the brewery in the Carlsberg Group started. Growthoriented strategy determined also a politics with the manpower surplus. A small number of
employees turn out to be technological surplus, mainly in the administration. Because they
were expected to grow they could deal with surplus of 50 workers without bigger dismissals.
Instead they find a job for them. Primarily target of dismissals were poor performers.
The biggest change had to be made in the “heads” of employees of the brewery. They
had to accept high standards of work ethic and corporate culture. Because they are relatively
small company Mr. Pedersen thinks that they have much greater chance to change people, to
transform a way of thinking into market oriented thinking.
We experienced what it means in the quantity of workload and what does it mean for
the results. … A focus on the land (i.e. the brewery) has increased very much,
compared to the previous period. [CC 7]
Proactive behavior, understanding of wider picture, responsibility and readiness to learn and
improve skills and knowledge are highly valued and it is expected from employees to be
flexible regarding job duties and time.
I must admit that I’m impressed with importance that our Managing Director gives
and how much he is willing to communicate with employees and to communicate
company values. [CC 6]
They are very flexible organization with a small management group and they know each other
very well. Mr. Pedersen included in his management team a couple of local managers with
experience of working for foreign owned companies. He is the only expatriate in the
Carlsberg Croatia. Relining solely on the local managers is the approval of their competence.
In Carlsberg Croatia they have been working to break barriers between different departments
and to increase the understanding of other areas of business.
As long I have done mine, I don’t care for the rest. (…) To be a part of management
team is not to be responsible for your department but to be responsible for the
company. (…) In our company we break these walls; we have a good teamwork and
group discussions. [CC 1]
For Managing Director in Carlsberg Croatia it is not the problem top-management team, but
the middle level management, which sometimes acts as a filter between top-level managers
and workers. Top managers have been working in Carlsberg for some time, they been
26
exposed to Carlsberg system, they have been to Copenhagen, they’ve seen their colleagues
from other countries, pass certain educational programs. But different situation is with the
middle level managers.
I must admit that I’m impressed with importance that our Managing Director gives
and how much he is willing to communicate with employees and to communicate
company values. [CC 6]
According to Mr. Pedersen in the company they have a good combination of Carlsberg spirit
and Carlsberg tools, a toolbox that give them every day know-how how to do business and,
the local knowledge how to implement that toolbox in the local environment. Former
temporally Manager Director, a local manager was a great help when it comes to relation with
the local community:
You must remember that Carlsberg Croatia is based in a very small community and
there are many (?) you need to now in order to do the business. You need to now …
how the culture is, how the circles, who is talking to who, in order to do the business.
[CC 1]
Nevertheless, Carlsberg Croatia became an "international work place". The role and
importance of the human resources sector has increased. Among other duties of HR lot has
been done in areas of training and education, career planning and, development of the HR
programs that support the company strategy.
Towards the end of last year, we joined the Carlsberg International Graduate
Programme whose aim is to employ young, educated and ambitious people in all
Carlsberg companies worldwide, people who are ready to learn and work in an
international surrounding. All companies included contribute in the formation of a
talented population for future growth of the group. The programme also includes
international exchange, i.e. leaving of our employees to foreign companies and arrival
of foreign ones into Carlsberg Croatia. (Source: www.carlsberg.hr)
In 2004, following exhausting testing and several rounds of selections, the Marketing
Manager Dino Bijac was included among the 23 top talents inside the Carlsberg Breweries
Group.
27
4. 3. Outcome of the encounter
Advanced technology meant reduced number of employees in production from the very
beginning. Because of that the process of downsizing had narrow range and it was selective:
underperformers were (politely) asked to leave the company. All employees had to accept that
they work in the international company with different standards of work behavior and system
is clear and transparent.
There is one atmosphere: I know if I would not work well I could loose a job. That is
transparent and pronounced. While I talk to colleagues from the other companies,
either in private or in business communication, I don’t see that there it is so
pronounced as in our company. … people perceive that efficacy is very important in
this company. [CC 5]
In 2004, the Panonska pivovara became Carlsberg Croatia – it seems that name Carlsberg has
the magic of its own. That was a great marketing and, generally business move – consumers
appreciate more beer produced by Carlsberg (Croatia) then by Panonska pivovara; business
partners show more respect; employees are proud to work in such company. And even the
Human resource manager can be satisfied. One of the managers who recently joined company
admitted:
… for sure I would not apply for the job of the (…) manager in the Panonska pivovara,
but that same work place in Carlsberg Group (in Koprivnica) was very attractive to
me. [CC 6]
Carlsberg does not give its name easy to some brewery, so this is recognition of good job
done on the restructuring and integrating company into systems of Carlsberg Group.
In November 2005, the Carlsberg Croatia was presented with the Employer Partner
Certificate for excellence in human resources management. That means that company went
through a rigorous process of testing all the most important processes in human resources
management.
28
5. Croatian vs. the “Western” economic culture
For employees from such medium sized towns and surrounding villages is harder to accept
implementation of corporate culture and internationally oriented way of thinking. Some of file
and ranks employees lack initiative:
I’m sure that it is not easy for many … It seem logical because it is …the local milieu
in which there are well defined rules of behavior. (…) Croatia has Zagreb and other
cities, unfortunately. And Karlovac is one of the other cities. I think that flexibility is
lower and that there is need to improve it in the future. [H 7]
On lower level there is still residual of the old mentality: “I’m not here to think – I’m
paid from 7 a.m. to 3 p.m. and you should tell me (what and) how to do...” [CC 5]
On the other hand, when Croatian managers are in focus some of our respondents advocated
opinion that there is no difference in the professional competences between expatriate and
local managers. Differences in the leadership style were attributed to personality of particular
manager and/or cultural background.
I think that we can't just like that make split between domestic and foreign (managers).
It was interesting that on the education course (…) about corporate culture one of the
things they pointed out is that difference between cultures, difference between
Englishmen, Dutch and us Croats, as nations, in the culturally determined way of
thinking, in the way we communicate, and so. [H 8]
Opposite view advocates opinion that successful expatriate managers have some common
features. One manger said that all expatriate managers want same things: a rise of profit,
reduction of workforce and reduction of production costs. The other said that they come for a
relatively short period so they can be completely focused on the business tasks and invest a lot
of energy and spare time into it. After that period pass, somebody else will come – a fresh and
demanding. And local managers have to meet that demands regardless their family obligations
and circumstances, health problems, etc. The other respondent offered more elaborated view:
“When you met one, you met them all. No matter whether they come from Holland,
Belgium or France, the first great difference from domestic managers is the great
responsibility towards signed contracts. They don't abuse shortages of domestic legal
system. Second great difference is that they think systematically, have all defined,
everything is according to defined procedures, manuals, no improvisation. And they
function as they would in their home country. This may posse a problem because they
29
also expect from domestic people to act in the same way. And business environment is
not the same.” [H 3]
Manager whose job is to professionally evaluate employees agrees that Croatian managers
have good university education. Still they lack soft management skills:
We don’t learn management skills at faculty and managers without economic
background lack understanding of business (numbers). …
[CC 5]
Generally, it seems that Croatian managers in a certain extent fit a stereotype about manager
with maybe little less systematic approach, a manager who does not plan so much as their
Western colleagues but definitively has advantage in unexpected situations which are not in
company manuals.
Generally, Croatian managers are very good managers but, not very good leaders.
Managing certain task in the certain time it can be tackled by Croatian managers. But
to create a vision what company needs to be - is difficult. …Many Croatian managers
like to tell people what to do. And also making priorities is dangerous thing because
you said No to many other things. Being a manager or leader is all about taking a
risk. Croatian managers are less willing to take a risk… [CC 1]
As a heritage from socialistic period Croatian business culture less encourages initiative, risk
taking, team work and delegation of responsibility. Our universities educate good
professionals, but as managers they lack soft skills. Constant education of selected ones in
foreign owned companies and enculturation in line with corporate values more and more
deletes professional differences between Croatian and Western managers. But, as our
respondent nicely expressed it, some differences are part of Croatian cultural identity:
We like, especially in (our) department, to maintain some Croatian, Mediterranean
and Central European charm … although we are Western owned company or
Scandinavian. I think that best solution is to have combination of both: to live
(corporate) values on our way.
In many situations our colleagues from Denmark still feel confused. For instance in
Croatia it is normal to have business meeting at the restaurant and have a lunch or
coffee. … But we are definitely serious about business, professionals. (…) We need
certain dose of discipline, which our principals give us, and I think this is a wining
combination. [CC 2]
30
6. Conclusions
The primary aim of this field is to identify different dimensions of encounters between
“Eastern”, in this case between Croatian, and the “Western” economic culture, and to answer
the question about the outcome the encounter. Hypothesis is that culture encounter will result
in a mutual change, learning and emergence of cultural compromises-hybrids ranging from
“Western victory” – ”Eastern defeat” to the opposite extreme. Looking a continuum of
possible outcomes of culture encounter ranging from “Western victory” – ”Eastern defeat” to
the opposite extreme it is important to note that the result of outcomes is not quite stable
position on continuum, fixed in time. Next possibility – permanent “clash of civilizations” –
on a longer run is not possible/viable in an economically successful company, unless in a
special circumstances.
In our case study in focus were cultural encounters in second and third ranked brewery
on the Croatian beer market. In both breweries process of ownership transformation started in
the first half of the 1990s and final take over happened in the first half of the 2000s. Croatian
breweries taken over by leading players on the world beer market (Heineken and Carlsberg)
are examples of cultural encounters with outcome closer to “Western victory – Eastern
defeat” extreme of continuum. Or in terms of typology suggested by colleagues from Poland,
it is a change by replacement – a strategy very common especially in corporations imposing
unified organizational solutions. A door to such solution was wide opened by stagnating
economic position of both breweries and positive reactions after take over accompanied by
the moderate to high expectation of the employees from the new owner.
But, that is not so for the first cultural encounter in Karlovacka pivovara. The structure
and outcome of the encounter of with Latin type of the Western business culture (before
Heineken) gives certain support to hypothesis about possible permanent “clash of
civilizations”. It seems that we cannot speak about one type of the Western business culture;
instead we should differentiate at least between Latin, American and European type of
Western culture.
Bad economic performance of Karlovacka pivovara during the period after take over
by Latin capital can not be attributed entirely to the problematic characteristics of the cultural
encounter, but certainly it had its weight. There was not confidence in abilities of managers of
successful brewery in the time before take over and not enough respect for theirs business
experience and knowledge of the country-specific features of market and beer industry.
31
Additionally, (correct) perception of the speculative nature of the take over accompanied by
modest investments lower the authority of the new (majority) owner and consequently the
authority of the expatriate managers. Wrong choices of technology solutions, also did not
help. None of our respondents did mention a war or postwar period as a factor of business
slow down of the brewery which was operating close to the front line.
Heineken as a second foreign owner of the brewery came to stay. Heineken’s
investment in the Karlovacka pivovara is a real success business story - in 2005 Karlovacko
lager beer won gold medal at The Brewing Industry International Awards and the President of
the Management Board Mr. Schoevers received award from CROMA Business Academy as
best manager in a category Company owned by foreign capital. Carlsberg’s take over of the
Panonska pivovara is story about a long waited success, with the happy end. In a short period
of three years their market share doubled as well as theirs ambitions. At lead positions in both
companies are relatively young but experienced managers, determined to turn their breweries
into a leading players in the Croatian as well as regional beer market. It was not easy to
achieve that and, they have made a lot of changes in their companies.
New majority owners initiate the process of the restructuring process and all changes
undertaken have twofold purpose: a) to have positive business effects in terms of productivity,
quality of products, cost efficiency and winning additional beer market share and, b)
transformation of all business activities in a “corporation format”. For big international
corporations unified organizational solutions have many advantages – accountability,
benchmarking, opened channels for sharing corporate know-how and Best practices, easier
temporally transfers of highly skilled workforce from one brewery to another corporation’s
brewery in some other country in order to get new business experience, etc. It has positive
effects on development of human recourses – a frame of standardized organizational structure
makes possible straightforward development of international career of local talents.
In the structure of organization multifold changes occurred. First and most obvious,
the names for certain positions in the organizational hierarchy have been changed, e.g.
technical director became the Director of production; general director now is President of the
Management Board or Managing director, etc. This is simple case of alignment with the
organizational structure of the mother company. But behind the nominal changes more
important is widening of top management team. During socialistic period in medium size
companies usually there were only three or four top managers. During the process of the
restructuring the new owners of the breweries enlarged the number of the top managers. That
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reflects two shifts: first, recognition of the importance of other departments in organization
and, second but not less important, certain democratization in the style of leadership.
Second, there was a process of organizational differentiation – some functional positions in
organizational structure were promoted into separate departments. E.g. in both breweries
department for the human resource management is relatively newly established. Some
functional position before did not exist, e.g. public relation manager. Departments of Sales
and Marketing gain on importance – it is not hard to produce but to sell a beer! Parallel to the
process of reducing the total number of employees was hiring new people, mainly for the
Sales department.
Third, the process of organizational downsizing of manpower happened in both breweries,
though in the different manner. Differences were largely due to the technology and the size of
the company, i.e. the process was more prominent in the bigger company with older
technology – Karlovacka pivovara. During socialistic era political and personal connections
often overruled criteria of economic rationality regarding employment of new labor. Bigger
brewery went the long path in the downsizing and it is ongoing process. Technological
changes and improvements were and still are connected with the job reduction in the
Karlovacka pivovara. Outsourcing was the other way to reduce manpower and, it will be used
in the future. Some organizational sub-units were taken out and sold and, now company hires
their services.
For many people restructuring was a shock, because employment in “theirs” brewery was no
longer secure and many lost their job because, either because they didn’t meet criteria of new
organization of work or as technology surplus. During socialistic period workers used to think
of brewery as “theirs” company, not only because of the ideological claim of the system of
socialistic self-management that employees’ own factories. In the smaller community it is also
easier to develop sense of attachment and loyalty to (successful) company, especially when
employment was perceived as secure, maybe till retirement. Some employees were not ready
to leave the Karlovacka pivovara, not even with a generous monetary compensation. When
they had find out that their name is on the lay-off list, few of them managed to get medical
certificate that they have limited working ability. According to Croatian law such workers can
not be lay off. Leadership of the brewery felt need to explain their way of doing business and
business goals to the local community.
Contacts with a local community … to get induce new way of thinking: We want more cost
efficient brewery so that we can stay for really long term. So, also to employ people for really
long period. [H 1]
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In Karlovac, where restructuring of the brewery was more profound, a problem with
motivation of the employees on the shop floor sometimes arise because every new
technological improvement in the production usually means that somebody lost his/her job.
In that sense a process of organizational change was less turbulent in the smaller
brewery (today Carlsberg Croatia). It has shorter tradition but new technology. Advanced
technology meant reduced number of employee right from the opening of the new brewery. In
new organizational scheme certain number of people was surplus but orientation to the growth
enabled Carlsberg Croatia to transfer great deal of those workers to new job positions, instead
to let them go. Additionally, process of corporate enculturation started as early as 1972 with
the licensed production of the Tuborg.
In both breweries a mentality of the local people were seen as an obstacle by lead
managers – weather it is local and not international orientation or disillusionment without
consequent response of seeking a new job, or something else. They tried hard to change it and
to make a winning team. In spite of contingency of employment, all employees are expected
to think about brewery as theirs – on the new way: to do more than is written in the job
description and to think and act outside the borders of theirs departments. A process of
evaluation of employees on all job positions is ongoing process – underperformers have no
place in new organizational schema. Work ethic and discipline went on the higher level, but
rewards for good job done are also much above Croatian average. A fact that they work in a
successful company gives them additional reason for satisfaction, as well as a fact that they
are part of the Heineken or Carlsberg group.
Generally, the authority of corporation made implementation of changes easier, with
the less resistance or conflicts. In an anecdote manner a manager with long tenure in the
brewery points it out:
If, for example, I would say before 10 years to this people: You cannot drink, they will kill
me. But when you came from abroad, from Heineken – that’s OK. It’s normal. [H 2]
To deal with the restructuring and to accept new corporate culture, values and practices was
harder for some employees – for those who are less adaptive/flexible and less ready to learn
and, for older workers. Some rank and file workers still have residual of old mentality but
they are certainly not obstacle for further business success of those breweries.
Employees and mangers had to learn how to be a part of the global corporate family
and local community. Great steps in that direction are joint projects with other breweries in
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the region owned by the Carlsberg (or Heineken) group. In both breweries a lot of money has
been invested in the improvement of the human capital of employees and especially
managers. Benefits from various forms of dissemination of corporate know-how are evident.
Almost all top managers in both breweries are relatively young or in middle age.
There is strong reliance on the local managers, especially in Carlsberg Croatia, where only
one expatriate is Managing Director. That made the incorporation in corporate systems more
challenging. It seems that they did it successfully with the big role of HR managers and with
the great help from corporate networks.
Case study allow researcher to study some aspect of a problem in some depth –
strategic decisions and action plans, the implementation process and organizational change.
Critics of the case study approach express concern that generalization is not always possible,
and, among a number of other problems, they draw attention on the possibility of selective
reporting and the resulting dangers of distortion (Bell, 2005). Including two breweries in a
study meant certain trade-off between depth of the insight and generalization. Case study
revealed some common and some specific features of cultural encounters of Eastern and
Western European economic culture in the Karlovacka pivovara and Carlsberg Croatia.
Majority of employees of Carlsberg Croatia went through long period of exposure to the
Western business culture. Because of that final take over was not perceived as a major
organizational stress. Additionally, technology and the size of organization were key variables
that determined different paths of restructuring process. If we put our findings in the wider
perspective that includes ACCESS experience (Cengic et. all, 2004), we can add one
additional variable that contributes to common or specific features of organizational change –
a level of autonomy from the foreign owner. Big international companies and corporations
tend to impose unified organizational solutions, with the more or less respect for local
circumstances. In our case study a Latin type of Western business culture had lower respect
for local circumstances and consequently was less economic successful.
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Endnotes:
1
Hopes were mixed for with fears regarding job security.
2
Sources of newspaper materials: http://www.nacional.hr/articles and http://www.croatiabiz.com.
3
When we remind him of that statement, he tried to soften it.
4
Source: http://www.heineken.com
The web page of the Carlsberg Croatia in November 2005 was not updated – according to
information from web page brewery’s market share was 10%.
5
6
Source: http://www.carlsberg.com
Literature:
Bell, J. (2005). Doing your research project. Maidenhead: Open University Press.
Cengic, D., Colic, S. and Topolcic, D. (2004). Menadžerska elita i neke dimenzije socio-ekonomske
kulture u Hrvatskoj /Mangers elite and some dimensions of socio-economic culture in Croatia/.
Društvena istraživanja, (13) 1-2 (69-70): 73-95.
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