2. History of Embraer
• EMBRAER--is a Brazilian aerospace company that
produces commercial military and executive
aircraft.
• Founded in 1969 as a government owned
company.
• Fully separated from government control in 1997.
• In 2000 went public (First public offering-NYSE)
• Company split pretty evenly as far as number of
commercial vs. military aircrafts built.
3. History of The Industry
• First commercial flight was actually conducted between St.
Petersburg Florida and Tampa in 1914 by Chalks Airlines.
• It really took of in after 1945 when the government set
safety standards for commercial flights.
• In 1978 a Deregulation Act was passed that provided
opening to new airline entrants to the market.
• 1979- early 1980’s there was an influx of new companies
that penetrated the market.
4. History of the Industry continued..
• Three new Business models emerged by the late
1980’s:
• 1- Major- Hub and spoke type system, large capacity
planes with a couple major airports though out the
country.
• 2- Regional Carriers- These carriers connect smaller
communities to major hubs and flights range in the
400- 1000 mile area.
• 3 - Low Cost Carriers- These carriers connect medium
sized communities with fairly large capacity planes.
These planes cover 600-2000 mile routes on average
and hold between 60-120 people.
5. Question 1
• Describe the competitive position of each of
the major firms in the aircraft manufacturing
industry. Which segments are they pursuing?
What is their business-level strategy?
6. Industry Today
• There are four Major players in the commercial industry -Embraer,
Bombardier, Boeing, and Airbus.
• These four firms are separated into two different markets; large
commercial jet and regional jet market. Boeing and Airbus create a
duopoly in the large commercial jet market while Embraer and
Bombardier are the two dominant companies in the regional jet
market.
8. Embraer’s segment
• The segments Embraer is trying to pursue are
commercial, military and corporate aviation
segments in the aerospace industry.
• Embraer has recently entered the 70-120 seat
market due to the increase demand for this
market.
9. Question 2
• What value and cost drivers have enabled
Embraer (a relatively new firm from an
emerging market) to grow rapidly and
compete against established firms from the
U.S., Europe, and Canada?
10. Quality
• Increases Embraer's perceived value while
lowering costs at the same time. With Embraer
building better products they lower the after-sale
service requirements/costs, creating satisfied
customers.
11. Innovation
• Embraer designed and developed the 90-120 seat
planes to satisfy demand for a vacant market. Embraer
has also increased its research and development
spending to fulfill consumer preferences. For example
they have increased head space, luggage and legroom
in its aircraft compared to its competitor Bombardier.
12. Economies of Scope
• Embraer develops
common platforms for its
aircraft. This reduces the
design costs by allowing
the company to develop
every aircraft roughly 90
percent the same. This
savings helps the
company keep overhead
costs lower than its
competitors.
13. Ambidextrous Organization
• Embraer has been able to balance trade-offs between cost
and innovation to be successful. Embrear's aircraft can be
customized effortlessly with its easy inexpensive
interchangeable interior design. Also, Embraer has been
able to use new innovative technology that lowers the price
of the aircraft, reduces operating costs for the consumers,
and their aircrafts are more reliable, comfortable, and safer.
14. The 70-120 seat void.
• According to the book 61% of
all US flights had approximately
70- 110 people.
• Embraer filled the vacancy with
the EMBRARER 170 and really filled a gap in
that market.
• As predicted the other major Airline
companies are beginning to follow.
15. Embraer Success In Short.
• Embraer is successful, because it reduces its
operational cost at the same time creating
innovated products that differ from their
competitors coupled with constantly attacking
un-served markets.
• Will Embraer be able to counter the likely
attacks from other Airline Industries in this 70-
120 seat market?
16. Question 3
• Use Porter’s diamond of national
competitiveness to analyze potential reasons
why Embraer has emerged as a successful
competitor from Brazil. What should Brazil do
to strengthen its national competitiveness in
this industry in the future?
18. Factor Conditions
Factor:
• Human Resources
•People with the knowledge and education
to innovate and create at Embraer.
The stable and healthy culture coupled with the extraordinary education
that the government aviation schools provide were a large contributor to the
overall National Competitive Advantage for Embraer.
19. Supportive Institutional
Framework:
•Aeronautical Technology Center ( CTA)
• Aeronautical Technological Institute (ITA)
• Government Funding of Embraer in their early
days.
The presence and availability of the above institutions created an unmatched
opportunity for the Brazilin company.
20. Demand Factors/Conditions
Demand Conditions:
•Brazil had a demand for regional airlines
•Embraer was able to fulfill this need.
The untapped market of regional airlines is something that Embraer took
advantage of in Brazil. After mastering this segment it was very easy to duplicate in
other parts of the world.
21. Local Competitive intensity
Competitive Intensity in a Focal Industry:
Not a major source of development leading to
international competitive advantage For
Embraer.
As many international companies like Volkswagen have experienced
molding your company in a very competitive a home market makes
expanding globally much easier. As for Embraer however the government
was so heavily involved that national competition was not much of a factor
in the long term success of Embraer.
22. Question 4
• To what degree might airplanes be
considered a “global” product that requires
minimal local adaptation? Where is
adaptation necessary?
Chinese Embraer!!
23. Global Product Outlook
• Airplanes are mostly a global product because
they are relatively standardized product
throughout the world. Due to international
flights, airplanes have become fairly similar
internationally because the airlines must travel to
airports in different countries.
• Although Embraer is a Brazilian company, they
make airplanes for countries in North America,
Europe, Africa, Asia, as well as other countries in
Latin America.
24. Question 5
• What strategy would you recommend that
Embraer pursue over the next three to five
years? What do you see as a potential long-
term vision for this company?
25. Future Strategy
• Embraer has no choice but to keep up with
innovation.
• They have done a great job of targeting profitable
markets. This must continue..
• The Inside sales and Marketing department
needs to be top notch as other competitors enter
the market Embraer needs to compete directly in
this 70-120 seat market.
• Quicker planes! ie… Create a new market
advantage as the small plane segment gets
flooded they need an advantage. .
26. Commercial Aerospace In the Future
• The outlook for the industry is very optimistic.
• Boeing reports a demand of 39,000 planes in the
next 7 years.
• Airbus will need to replace a large portion of the
European feet in the next 10 years due to age.
• The rising world urban middle-class means there
will be a rise in demand in air travel.
• The International Air Transport Association (IATA)
stated that combined profit this year will exceed
7 billion the highest ever reported.
27. Case Questions Recap
1. Describe the competitive position of each of the major firms in the aircraft
manufacturing industry. Which segments are they pursuing? What is their business-
level strategy?
2. What value and cost drivers have enabled Embraer (a relatively new firm from
an emerging market) to grow rapidly and compete against established firms from the
U.S., Europe, and Canada?
3. Use Porter’s diamond of national competitiveness to analyze potential reasons
why Embraer has emerged as a successful competitor from Brazil. What should Brazil
do to strengthen its national competitiveness in this industry in the future?
4. To what degree might airplanes be considered a “global” product that requires
minimal local adaptation? Where is adaptation necessary?
5. What strategy would you recommend that Embraer pursue over the next three
to five years? What do you see as a potential long-term vision for this company?
28. Additional questions for Discussion
• If a new market opened up in the jumbo jet arena
should Embraer participate?
• How was Embraer able to succeed internationally
even when they had only a few competitors at
home. Many international companies link there
success to fierce national competition.
• What Markets do you see Embraer in 10 years
from now.
• How does government control and regulation
effect the advancement of an industry like
commercial aeronautics.
29. Works Cited
• Rothaermel, Frank. Strategic Management. 1st. Ney
York: Mcgraw-Hill, 2013. Print. Rothaermel, Frank.
Strategic Management. 1st. Ney York: Mcgraw-Hill,
2013. Print.
• Embraer, , dir. We are Embraer. 2013. Film. 24 Mar
2013.
<https://www.youtube.com/watch?v=3VGOc3aydRc>.
• Embraer, . "For the Journey." . Embraer SA, 24 03 2013.
Web. 24 Mar 2013. <http://www.embraer.com/en-
US/Pages/Home.asp&xgt;.
• "Airline." 1st. 2013.
<http://en.wikipedia.org/wiki/Airline>.
30. Works Cited Continued..
• Bajusz, Pavol. "Flying above the clouds." . Gulliver,
20 09 2011. Web. 24 Mar 2013.
<http://www.economist.com/blogs/gulliver/2011
/09/aviation-industry>.
• Price, Wayne. "Brazilian engineering company
eager to land at Melbourne airport." Florida
Today. Floridatoday.com, 19 MARCH 2013. Web.
24
• Frontier, . Frontier Airlines, 24 Mar 2013. Web. 24
Mar 2013. <http://www.flyfrontier.com/who-we-
are/company-info/our-fleet/embraer-e190>.
