Aerospace company Embraer's International Business strategy 1994 - 2014

1. Embraer
A Case Study in
International Business
Richard Gemmill, Robert Servais, Vijay Seethepalli

2. ●
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Initially supported by Brazil’s government,
by 1994, Embraer had reached world market
shares of 31% and 42% in the regional jet
and the military trainer markets,
respectively.
Strategic Trade Theory: Strategic
intervention by governments in certain
industries can enhance their odds for
international success
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Embraer was created by the Brazilian
government in 1969 to manufacture
military aircrafts.
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Factor Endowment Theory: Nations will
develop comparative advantages based
on their locally abundant factors, in
Brazil - “Technology Valley”, abundant
land, and cheap labour.

3. Strengths
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Strategic alliances with other Aerospace
companies
Available financing for Embraer sales
Risk partners lower risk
Short product development lifecycle of 36
months
Threats
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Weaknesses
Fluctuating and rising currency
Lower demand for commercial aircraft due to
worldwide economic downturn
Huge order backlog of about $18 billion
Bombardier closely competing and matching all
product offerings
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R&D is weak due to lack of government
support
Lack of control due to outsourcing
Too many suppliers, dependency on
international suppliers and markets
Low local content, 95% of equipment, raw
materials, and components are purchased on
International markets
Opportunities
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Developing countries and emerging markets
Popularity of regional jets due to high fuel
prices
High Quality reputation can be leveraged for
military contracts (US Army)

4. National Competitive
Advantage
●
Brazil government privatized Embraer
in 1994 to maximize profits. By 1998,
Embraer had become the world’s
leader in the regional jet market,
surpassing Bombardier of Canada. In
1999, Embraer became Brazil’s
leading exporter and accounted for
about 7% of all of Brazil’s exports of
manufactured goods.
●
Today Embraer is the 3rd largest
commercial Aircraft manufacturer in
the world, after Boeing and Airbus.

5. Porter’s Five Forces
1.
Power of Buyers: Moderate, fewer clients and governments can buy new planes, however, they are willing to
pay a higher price for safety and quality.
2.
Power of Suppliers: Is low, as there are many suppliers in the international market, Bombardier is cutting
down from 400 suppliers in older product lines to 20 suppliers for their newest product line.
3.
Rivalry is moderate as there is only one real competitor - Bombardier. Boeing and Airbus manufacture much
bigger planes.
4.
Threat of new entrants is very low due to extremely high fixed costs.
5.
Substitute products are non-existent or usually more expensive or
less attractive.

6. 1
Questions
to Address.
From a resource-based view, what are the key success
factors behind Embraer’s success in the market for
regional jets?
2
What changes do you foresee over the next five years in
the market for regional jets?
3
4
Since September 11, 2001, demand in the airline
industry has been unstable or deteriorating. How can
Embraer grow and remain profitable in such an
environment?
How can Embraer’s international operations be
upgraded to increase its competitiveness?