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Embraer Case

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Q1.How has Embraer managed to succeed as a global competitor from within the confines of an emerging economy? Advantages and disadvantages Embraer has derived from the Brazilian context.

Strong government support created competitive advantages in the aircraft industry and led Embraer to become a global player. As a factor condition in the determination of national competitive advantage by Porter (Exhibit 1), the government established an environment where Embraer was able to procure raw materials easily through no tax or duty on imports.
To support Embraer’s business, related and supporting industries were developed by the Brazilian government setting aeronautics as a priority to grow the nation’s economy. The government tried to develop this industry not only for military needs but also for the civilian sector, so the company enjoyed special privileges such as being the supplier of choice for Federal agencies. These led to the successful entry into the U.S. market through certification from the U.S. FAA, resulting in Embraer capturing a major share of the commuter turboprop market.

Advantages:
• Embraer’s most profitable years came after the company was privatized with approval from the government in December 1994. In addition to increased flexibility, the privatization allowed Embraer to reduce the workforce and introduce organizational changes such as revamped incentive structures.
• The Brazilian economy provided Embraer with lower labour costs (e.g. $10/hour lower cost for engineers in comparison to Bombardier). The lower production costs enabled Embraer to price its planes more competitively than its competitors.
• The layout of Brazil forced the country as a whole to develop aviation as a means of transportation. This led to Brazil setting up industrial hubs to support Embraer. Other competitors likely did not face the same sort of pressure, where

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