Taking the road less traveled can not only lead to profits but also help build sustainable relationships, as Shandong Shantui Construction Machinery Import & Export Co Ltd, a Chinese producer specializing in heavy equipment, has discovered in South Africa.

What really makes Shantui different from its global and Chinese peers is its foresight in setting up a network of fully owned subsidiaries in South Africa, rather than dealers.

Also in the cards are steps to broaden the network in Africa by having its own distributors, company officials said.

"We are totally focused on Africa, as we believe that it is an emerging market that offers immense long-term growth potential for our products. Our strategy hinges on setting up subsidiaries and, later, distributors in strategic markets so that we can be closer to the markets and customers with our products," said Dylan Chicken, general manager and director of Shantui Equipment South Africa (Pty) Ltd.

Chicken, who has worked for more than seven years with the Chinese company, including three as a dealer, said that Shantui had anticipated it would succeed in the long run.

"When our parent started its African operations in South Africa in 2009, like most of its peers it was also reliant on a network of local dealers to push its products. But it was a bad time for the company as most of the dealers were hit by the global financial crisis and eventually shut up shop," Chicken said during an interview at the company's expansive office in Kempton Park in the Gauteng province of South Africa.

"Luckily for us, the parent company had decided to register a subsidiary in South Africa in 2009. This became fully functional in 2010," he said.

Explaining the difference between the two approaches, Chicken said that dealers are generally independent individuals or entities associated with several companies and products, whereas a subsidiary is a divisional company that is owned by the parent company.

What makes the subsidiary option more viable is that it enables companies to alter their marketing and distribution strategies quickly, according to fast-changing market needs, he said.

"Shantui took the latter option so that it could reach out to more customers and also strengthen and be closer to the market and its customers in Africa. The South African subsidiary is much like the firstborn child of our global subsidiary network," he said.

"Success is ultimately all about being present in the right markets with the right products and at the right time.

The subsidiary route has enabled us to achieve this goal."

The parent company has 10 subsidiaries around the world. Three of them are in Africa, with Ghana and Kenya being the other two locations on the continent. The South African subsidiary is based in Johannesburg and covers the Mozambique, Namibia, Botswana, Zimbabwe, Zambia and Madagascar markets.

"Apart from sales, the subsidiary also functions as a center for support, services and training," said Yue Peng, the representative for Shandong Shantui Construction Machinery in South Africa. Yue said that the subsidiary accounts for half of the parent company's overseas revenue and has more than 14 South African employees. The subsidiary imports construction machinery and small-scale mining equipment from China and distributes these products in the local markets.

"Our main goal is to be a key player in the market by setting up a proper distribution network."

While setting up the distribution chain is still top priority, it does not mean that Shantui is skimping on innovation or quality, Chicken said.

The Chinese company is now the third-largest bulldozer supplier in South Africa, after Caterpillar Inc from the United States and Komatsu Ltd of Japan.

In excavators, it is pitted against brands such as Honda Motor Co Ltd of Japan and Doosan Corp from South Korea, and in the loaders market, against Chinese peers like Guangxi LiuGong Machinery Co Ltd and Shandong Lingong Construction Machinery Co Ltd. The company also faces tough competition from German companies in the construction machinery sector.

"Though the competition is stiff, we have some inherent advantages in South Africa. The dealer network has already provided a solid platform for us to build upon," he said.

"We did not come with zero machines. Rather, we had several machines in the market already. The other advantage is that we are here as a fully owned subsidiary. So we have common objectives, strategies and purposes with the parent company. Dealers, on the other hand, are interested in making profits for just themselves," Chicken said.

Yue, from the parent company, said that unlike other brands, Shantui also enjoys several price advantages.

"Pricing is the most obvious way to attract more customers and gain acceptance," Chicken said. "But that alone is not enough. Companies also need to have the requisite infrastructure to keep the network ticking, especially in terms of support and services."

"South Africa is different from other African markets," Yue said. "Customers, such as those in developed markets,

emphasize the manufacturer's comprehensive capabilities such as quality consistency, promptness of services and supply of spare parts as well as the global influence of the brand," Yue said.

Shantui has sold about 600 pieces of heavy equipment in South Africa, a market that has an estimated annual potential for 7,000 to 8,000 units, especially for mini ng and construction, Chicken said.

"We expect the South African market to pick up rapidly as the government has recently launched a national infrastructure development plan."

He said that demand will primarily come from infrastructure construction and agriculture, which is expanding because of rising food demand in South Africa and other African countries. Mining demand may remain flat in the long term, depending on demand from the coal sector.

"We are also taking the next step by setting up a full-fledged distribution network. The subsidiary model needs support from a robust distributor network, especially in terms of brand promotion and product placement. If we have a mature distribution network in place, we will be able to reach out and service more markets," Chicken said.

"It has been a slow and difficult process for Chinese companies to establish their products in South Africa. But the process has been much more easier than in other African markets.

"Chinese brands have made rapid strides in quality, especially during the past five years. This is remarkable, considering that it took more than 20 years for most of the Japanese brands to make a mark," he said.