Arizona firms in China go for gold with '08 game
Phoenix Business Journal
By Gale Scott
August 8, 2008
When doing business in China, "guanxi" dictates whether a partnership, collaboration or deal will be successful.
At its root and strengthened over centuries, the term refers to relationships. But more specifically, it describes the essence of how business operates in the Far East, where principles commit friends and colleagues to do everything they can for each other when called upon.
In the simplest of terms, "You scratch my back, I'll scratch yours."
A handful of Phoenix companies know the philosophy well, for it has led to successful business ventures in that booming economy. As the Olympics get under way in Beijing, several Arizona firms are benefiting from commercialization of the games and using the right guanxi to forge lasting relationships while boosting business.
Some are relying on strong ties to Olympic organizations and committees to enhance revenue, while others are bridging the vast gaps in language, culture and logistics through products and services.
When competition begins this week, more than 20 U.S. athletes will be wearing custom-made insoles manufactured in North Scottsdale to increase their performance.
The eSoles ePro product went to market in early 2006 and is used by more than 200 professional athletes, including pro golfer Vijay Singh, Arizona Cardinals linebacker Carlos Dansby and Christian Vande Velde, who finished fourth in the Tour de France and will ride on the U.S. cycling team in Beijing.
ESoles LLC raised more than $4.5 million to research and develop its products, and later this year it will hold another fundraising round for $6 million to develop a wireless application through the insole to create power, force and cadence -- all while being tracked by a global positioning system that can be uploaded to the Web, a watch or cell phone.
"We're constantly adding new capital to the program," said CEO Glen Hinshaw, who holds national and world cycling championships.
ESoles inked a deal Aug. 5 to manufacture a customized cycling footwear for Wisconsin-based Trek Bicycle Corp.
Phoenix-based Auralog Inc., which creates speech-recognition and language-learning software, saw a 60 percent jump in U.S. sales in May, June and July from its language application that recognizes the four tones of Mandarin Chinese.
Officials expect a big August as the games begin.
"We're definitely seeing an impact," said Melissa Onda, director of marketing in North America. The company, which employs 350 in the U.S., China, Paris, Italy, Spain and Germany, had a similar sales spike during the 1998 Winter Olympics in Nagano, Japan.
New York-based TransPerfect Translations International Inc., which opened a Phoenix office in February, is working with many Olympic corporate sponsors to manage communication services, enabling viewers to get information in their native languages.
"The Olympics are quite literally the largest stage requiring communication to a global audience," said Phil Shawe, co-founder of TransPerfect.
Communication is perhaps one of the biggest hurdles when doing business overseas, especially in a country that has more than 400 dialects. For instance, the word "ai" can mean "small" or "love," depending on its pronunciation.
TRW Automotive Holdings Corp., parent of TRW Safety Systems in Queen Creek, is consulting with the Beijing Olympic Committee on a voluntary basis on transportation issues.
Using a system developed in the U.K., the Michigan-based firm also is providing transportation safety education to hundreds of volunteers who will escort visitors, Olympic executives, athletes, referees and journalists.
"It's a very busy time," said XY Sun, vice president of business development for TRW's Asia Pacific region. Sun moved to the Valley in 1996.
None of the companies contacted for this story wanted to disclose details of the deals they had struck.
While some businesses have thrived during the Olympics push, life in Beijing has been up-ended. Factories have been closed for months, and traffic has decreased by 90 percent as officials try to address pollution and human rights concerns.
Landlords and hotel chains are gouging visitors, tripling rates in some cases, according to Lee Knowlton, president of international business for Scottsdale-based Kahala Corp., parent of Cold Stone Creamery, which is opening 25 stores in the market next year.
"We certainly didn't accelerate our growth because the Olympics came to Beijing," Knowlton said. "We weren't going to pay exorbitant rents."
Best Western International spokesman Troy Rutman expects higher occupancy rates during the games, but wasn't aware of any price hikes. He said the market is extremely competitive and flush with four- and five-star hotels. The Phoenix-based hotel chain operates 30 locations in China and plans to launch 10 more.
Taser International Inc. is one Arizona company that won't experience any revenue bumps because of the Olympics. The Scottsdale stun-gun maker is prohibited under U.S. law to export any manufactured goods if the product is used as a law enforcement crowd-control device. The measure was enacted after the deadly Tiananmen Square protests in 1989.
While Taser has contracts with 45 governments, it often is prohibited to work in countries known for human rights violations or religious persecution, or those in poor diplomatic standing with the U.S., said Pete Holran, Taser's vice president of public relations and government affairs in Washington.
For those companies with good guanxi, or karma, the grand stage of the Olympics will cement global business ties for many Phoenix companies.
Kim Kubsch, who spent 10 years in Asia developing shopping centers and mixed-use projects, said the Olympics offer one of the best ways to understand Chinese business and culture.
"Those Arizona companies that are associated with the Olympics, whether as a sponsor, supplier, service provider or the media, will further understand the guanxi," said Kubsch, founder of GlobalArizona.com, a consulting service that educates Americans on Asian business practices and cultural awareness.