Embraer Case Essay

1114 Words Apr 27th, 2015 5 Pages
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
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Many of the aviation companies within Brazil were suppliers and not direct competition.

Disadvantages:
• Interest rates in Brazil were higher than other advanced countries (where their competitors operated). This imbalance in interest rates was the root of WTO claims that were brought against Embraer.
• On the other hand, a disadvantage is to be easily affected by the nation’s economy. In the late 1980’s and early 1990’s, large deficits constrained the government’s export support, and the decrease on national credibility caused by the deficit affected Embraer’s sales and profit.

Q2. To what extent can Embraer’s success be ascribed to the Brazilian government?

Embraer was first founded in 1969 by the Brazilian government because of their focus on aeronautics owing to their vast landscape and geography. The government continued to support Embraer by setting up technological facilities such as the CTA, ITA, and IPD to provide technological advances and support for innovative advances.
Embraer also enjoyed privileges such as having federal agencies being instructed to purchase from them instead of competitors where possible, not having to pay taxes on imported raw materials, parts and equipment, and having the opportunity to raise capital through investments from other Brazilian corporations.
The government further supported the privatization of Embraer by assuming $700 million of

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