INTERNATIONAL TECHNOLOGIES NETWORK HELPS AMERICAN BUSINESSES SET UP VENTURES IN CHINA, AND CREATES ITS OWN PARTNERSHIPS WITH CHINESE TECHNOLOGY COMPANIES When S.R. Nair began opening factories in China in the late 1980s, his Chinese partner insisted that a dormitory be built in each one so that workers could take an afternoon nap. More than a decade later, much has changed in China. “They’re more open and aware of what’s going on in the outside world, and they’re adapting to it,” Nair said. “It’s become easier to negotiate with them.” For Nair and his partner, John Farid, neither of whom speak Chinese, that has meant a boom in business. In 1995, Nair and Farid opened Thousand Oaks-based International Technologies Network Inc. to consult for American businesses interested in working in China but unfamiliar with the customs. The company has grown rapidly since that time, from $500,000 in revenue in 1995 to an expected $10 million this year. The company started out purely as a consulting business drawing on the experiences of Farid and Nair, who had worked in China for more than a decade before starting ITN. Changing focus ITN’s first client was a Chinese chip manufacturer looking for an American partner. Unable to find any company willing to buy in, ITN decided to change its model: ITN would become the Chinese company’s partner. The joint venture was relatively successful and was eventually bought out by a U.S. competitor. Today, a key component of ITN’s business is forming partnerships with Chinese companies that manufacture air-conditioning units, circuit boards for mobile phones and television components. ITN focuses on exporting and trading the manufactured products, while the Chinese partners, some of which were state-owned before the partnership, help finance and run the company in China. Most of the products are sold to companies in other Asian countries and in Eastern Europe. ITN also makes venture capital investments in emerging Chinese firms, many of which are in the process of being privatized. It recently invested in a state-owned speaker company that supplies equipment to Phillips Electronics and other consumer-electronics manufacturers. ITN’s investment will be used to help take the company private and change it from a money loser to a money maker, Nair said. But that transition can be an extremely difficult one in China. “In state-owned companies, there’s no incentive (to perform well), and a lot of overhead,” Nair said. “When we privatize, we trim the staff and put in a reward system for people who stay.” The cultural differences between America and China sometimes take a toll on ITN. In one joint venture, a company that made parts for circuit boards, ITN’s role was to appoint the company president while the Chinese partner would appoint a vice president. But the partner titled the vice president the “Chinese president,” creating a dual management and operating structure that ITN found unworkable. Eventually, it was forced to sell the firm to its Chinese partners. Many of the challenges have been resolved through a personal touch. When doing business in China, Nair said, one meets with company leaders in person and puts more emphasis on a handshake than a contract. It also requires learning the culture and working within it. “I met with the vice minister in one of the cities we do business in, and he said, ‘We like U.S. companies, just don’t try to bring your laws here,'” Nair said. In 1997, with a couple of venture deals under its belt, ITN returned to its main mission: consulting for American businesses that were interested in setting up manufacturing facilities and other operations in China. The company’s consulting clients include Minnesota-based Sheldahl Inc. and Florida-based Jabil Circuits Inc., both of which are involved in electronics manufacturing. It also began making contracts in Europe to sell products from China. Many of the products made by ITN’s Chinese joint venture companies are sold to firms in Eastern Europe and Turkey. Entering the franchise business That same year, the Chinese government lifted restrictions that forbade companies from forming franchises. So last year, ITN signed an agreement with Chem-Dry, a professional carpet cleaner based in Utah, to open Chem-Dry franchises in China and Turkey. ITN has marketed the service to U.S. hotels and the U.S. embassy in the five cities where it does business. So far, that part of the business is still losing money. Craig Donaldson, CEO of Chem-Dry parent company Harrison Research Inc., said he chose ITN as the master franchisee in the China market because of the company’s previous business success in the country and its knowledge of the market. Chem-Dry sets up master franchises in which one company manages all the franchises in a certain country, either owning the franchises outright or selling them to individuals within the country. ITN has decided to own all the Chem-Dry franchises itself. “Our business is a common-man’s franchise,” Donaldson said. “We want someone willing to roll up their sleeves and relate to prospective franchise owners, who are often newcomers to business.” Nair, a native of India, began his work in China as a banker in Hong Kong. He met Farid while his bank was helping the latter finance a deal in China, and the two later went to work for a consulting business until it folded in the early 1990s. That prompted them to form ITN. Farid currently lives in Beijing and handles business in China while Nair works out of Thousand Oaks.
