Embraer is the third largest aircraft manufacturer in the world. The company has undertaken several strategic decisions that have improved its competitiveness. Government support and specialization in the regional jet market are some of the key success factors of Embraer (Khandwalla, 2001). Embraer faces increased competition from Bombardier. This necessitates the company to undertake several strategic decisions to safeguard its future.
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Embraer’s supply chain provides the company with a competitive edge over its competitors. The innovative supply chain of the company leads to a significant reduction in the risks and costs of R&D. In addition, the supply chain helps in reduction of the duration of the product development process.
The E-Jet family of airlines is one of the most competitive product lines of the company (Peng, 2011). Bombardier does not have similar jets that can compete with the E-Jet family.
Embraer is highly dependent on the international market for the purchase of equipment, materials, and components that are vital in the manufacture of aircrafts (Peng, 2011). This increases the company’s vulnerability to exchange rate volatility.
Embraer does not have good relationships with universities, which are vital in R&D (Dillingham, 2008). This may limit the ability of the company to compete with aircraft manufacturers that have good ties with universities.
Increased demand of corporate jets would provide an avenue for future growth of the company. In addition, the company expects domestic sales to reach $500 million (Peng, 2011).
Embraer has enough funds to fuel its future growth. CDC Leasing Company has provided Embraer with a loan of $2.2 billion. In addition, BNDES has promised to increase financing of Embraer sales from 30% to 60% (Peng, 2011). These funds would facilitate future growth of the company.
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Embraer faces increased competition from Bombardier. Bombardier’s has received many orders for its new C Series jets, which have a capacity of 149 seats. However, Embraer does not have jets that can compete with the C Series jets (Peng, 2011). Inability of the company to compete with the new C Series Jets would make the company lose a sizeable percentage of its market share.
Appreciation of the Brazilian real threatens to increase the costs of Embraer jets. This is because Embraer denominates approximately 40% of its expenditure is denominated in the real (Peng, 2011). A significant increase in the price of Embraer jets would reduce the competitiveness of the company.
Key Success Factors
Embraer specialized in the development of military aircraft and regional jets. This enabled the company to build its image as a company that manufactured high quality jets. Specialization enabled the company to understand the needs of the market. In addition, government support through Finex – an export-financing program – eased the company’s entry into the international market (Peng, 2011).
Market Changes within the Next Five Years
There is a significant reduction in demand for high capacity regional jets. On the other hand, the demand for corporate jets is increasing. Therefore, in the next five years, corporate jets will account for a majority of the aircraft sales in the regional jet market. Companies would differentiate their jets using inflight comfort and fuel efficiency (Inderwildi & King, 2012). Therefore, it is vital for Embraer to acquire this market prior to the entry of other companies.
Embraer has grown from a state-owned company to a global leader in the manufacture of aircraft. The growth of the company has been gradual. Several strategic steps have led to the current position of the company. However, drastic changes in the market necessitate the company to have a high level of flexibility (Kachru, 2009).
Dillingham, G.L. (2008). Aviation and the environment: NextGen and research and development are keys to reducing emission and their impact on their impact on health and climate. Cincinnati, OH: DIANE Publishing.
Inderwildi, O. & King, D. (2012). Energy, transport, & the environment: Addressing the sustainable mobility paradigm. London: Springer.
Kachru, U. (2009). Production and operations management. New Delhi: Excel Books India.
Khandwalla, P.N. (2001). Organizational designs for excellence. New Delhi: Tata McGraw-Hill Education.
Peng, M.W. (2011). Global business. Mason, OH: South Western Cengage.