ADMN 404 Strategic Management Assignment 3 capstone strategic mgmt Embraer Athabasca University

ADMN 404 Strategic Management Assignment 3 capstone strategic mgmt Embraer Athabasca University

Embraer SA Strategic Report

ADMN 404 Assignment 3

Executive Summary Embraer SA is a leading aerospace conglomerate, specializing in the manufacturing of small to mid size commercial, business, and military aircraft headquartered in Sao Paulo, Brazil. Over the years, Embraer has seen some tremendous successes, though decimation of the aviation industry due to the COVID-19 pandemic quickly following a broken venture agreement with Boeing has resulted in the firm seeing dismal profits and in need of a new strategic plan moving forward.

The analysis of the external environment shows that while rivalry within the industry is the highest competitive force, the bargaining power of buyers remains low due to the unforeseen circumstances of the pandemic on the industry.

Barriers to entry for newcomers is relatively high, and the niche market of jet engine manufacturing causes the bargaining power of suppliers to be high as well, with threats of complements and substitutes remaining low. Analysis of the macro environment show strong opportunities in the industry, most notably a demand for aircraft to serve regional route demands and the growth of the business jet segment. The major threats in the macro environment are government travel regulations and the changing of air passenger behaviour.

Embraer possesses internal strengths in offering differentiated, superior quality product and after-sale service, though suffer from weaknesses surrounding efficiency due to company lay-offs.

The three strategic options presented in this report are expansion on three fronts: geographical, product, and market through technological paradigm shift.

The recommendation of this report is for Embraer to focus on cementing alliances with airlines throughout Asia Pacific in order to establish a market for their 90-120 seat regional jet products. Implementation includes centralization of the company organizational structure to improve efficiency, marketing products to airlines, achieving alliances, and continuing to gain market hold through realized economies of scale.

Introduction / Company Overview Embraer SA is one of the worlds leading aerospace conglomerates, specializing in the manufacturing of small to midsize commercial, business, and military aircraft. Headquartered in Sao Paulo, Brazil with design, development and manufacturing activities taking place throughout five industrial units within Sao Paulo. The firm has recently opened up service centers in Singapore, Beijing,

Amsterdam, Washington, D. C, and Fort Lauderdale, Florida to offer better support to customers in respective regions. Since it was founded in 1969 through a joint union between Ozires Silva and the Brazil government, Embraer has delivered more than 8000 aircraft to date.

Up until the mid 1980’s, Embraer has focused its production on military and defense aircraft, contracted largely by the Brazilian Air Force. It wasn’t until the development of the 30-seat EMB 120 Brasilia aircraft in 1980 that Embraer established a prominent position in the regional jet segment. With the firms strong passion for innovation and dedication to advanced technology within their product, Embraer began to set new standards within the regional aviation segment.

After experiencing financial crisis in 1990, Embraer moved to privatize its business and focus its efforts further on innovation and technology advancement. From this pivot point to R&D came the production of the ERJ 145 jet family in 1994—a series of 37 to 50-seat pressurized regional jets that offered high performance with low operational costs. The ERJ 145 family was critical in establishing Embraer’s position within financial markets.

Recognizing the success of its regional jet series, Embraer expanded to enter the business aviation market with the 2000 introduction of the Legacy Jet. This market entrance showed Embraer’s carefully tailored expansion plan, and allowed the company to issue an IPO in order to exchange on the NYSE as ERJ. Like many others in the industry, Embraer felt the effects of the 2009 financial crisis; yet the company responded quickly to reduce administrative and commercial expenses in order to maintain efficiency. The company underwent substantial financial and administrative restructuring in order to increase its cash liquidity. By maintaining essential R&D investments and a conservative cash flow, Embraer was able to fully deliver forecasted results and further secure their credibility in the market.

As a leading manufacturer of commercial and regional jets up to 130 seats, an Embraer aircraft takes off every 10 seconds somewhere in the world, transporting over 145 million passengers each year. Today, Embraer employs 18, 000 and is the third largest manufacturer of commercial jets. The company has a valuation of $5.83 billion (net revenues, 2018) and shares currently trading at $6.42.

Though Embraer’s 2Q20 liquidity remains strong, the unprecedented effects of the COVID-19 pandemic on the aviation industry, as well as a failed joint venture with Boeing, have led to the company quickly bleed funds.

This report will evaluate Embraer’s current external and internal environments, and suggest strategic options that will help the company combat the forces of the global pandemic and regain stability moving forward. While Embraer continues to hold its share of the market on innovation and development, new strategies are

needed in order to keep a firm stranglehold on market share throughout this volatile time.

Mandate From humble beginnings to a global leader in aircraft manufacturing, Embraer has centered its activities on a simple corporate mandate—“Challenge. Create.

Outperform.” A mission statement focused on challenging new innovation and creating the top preforming aircraft in several differentiated market segments has lead the company to become a top industry competitor amidst economic decline. With a focal point on creative innovation and differentiated products, Embraer is able to pivot its market strategy to fit the quickly changing needs of its customers in the new environment the industry finds itself in today.

Embraer (Annual Report, 2018, pp. 7) states its vision as further consolidating its position as one of the leading forces in the global aerospace and defense and security industries. Embraer is a market leader in the segments in which it operates and commands a reputation for excellence. The firm also states seven values they incorporate in order to achieve these statements, which can be seen in Appendix 1.

The company website (www.embraer.com) states that Embraer strives to make a firm commitment to aligning economic goals with socio-environmental awareness. Using their corporate values as a guideline, Embraer has constructed a sustainability plan that includes these major goal pillars: • • • • • • • •

Ethics, transparency and compliance.

Economic and financial stability.

Product safety.

Personal development.

Research, development and innovation.

Atmospheric emissions.

Health, safety and wellbeing.

Natural resources and waste.

It is evident by the firm’s vision, values, and future goals that focus on innovation and R&D to produce valuable products backed by after-sale support to its customers are key to Embraer’s long-term success, as the company is positions itself to adapt to changes within the volatile market. Embraer is also passionate about the natural environment in which its aircraft fly. This commitment to reducing atmospheric emissions and combating the issue of scarce natural resources help develop integrity and trust amongst a loyal customer base.

As a publicly traded company, Embraer’s most important stakeholders (Appendix 2) are shareholders. As technical owners of the company, the firm would not exist without the inflow of cash from purchased shares. As the main

goal of these investor is to maximize profits and return on investment, customers of the firm become the next stakeholder of importance. Without customers to purchase their aircraft, the company would no longer function.

People (employees), suppliers, regulators, government, and surrounding communities also play a role in the stakeholder web of Embraer; it is important to properly value all groups of stakeholders, as they all play an instrumental role in the success of the firm.

External Analysis Competitive forces Because Embraer operates in the competitive commercial aviation industry, the economies of scale are fairly difficult to achieve for new entrants. This makes it easier for firms like Embraer producing large capacities to have a cost advantage, driving down costs per production unit by mass-producing a standardized output. Furthermore, Embraer benefits from economies of scale through the cost savings associated with distributing, marketing and advertising costs spread over a large volume of output. An elevated focus on R&D and an emphasis on high quality innovative aircraft with exceptional after-care services give Embraer a brand loyalty that make it difficult for new entrants to take market share away from the firm. Additionally, the switching costs associated with customers opting for a new brand of aircraft is exponentially high; airlines with Embraer aircraft in their fleet have already put tremendous amounts of time and money into the planning of aircraft routes, training of crews, and maintenance on Embraer specific aircraft. Therefore, existing customers are highly unlikely to swap out their Embraer aircraft for that of a new entrant. All these forces combined heighten the barriers to entry, and the threat of new entrants is low.

The level of competitive rivalry in the aerospace industry has grown intense.

With just five main competitors in the industry (Boeing, Airbus, Bombardier, Dassault Aviation, and Gulfstream Aerospace), the industry competitive structure is a consolidated oligopoly, and the action of one competitor directly affects the profitability of Embraer. This rivalry increases as Embraer’s main competitors invest to develop better technology and deliver superior value and performance. Industry demand is also a factor in the level of rivalry, and has been devastatingly affected by the global pandemic COVID-19. With global airlines unable to fill routes, the demand for commercial aircraft has dropped significantly over the last year. With demand stagnating, the only way for Embraer to grow is by taking market share directly away from its competitors in the existing climate. Embraer can mitigate the threat of high rivalry amongst competitors by building sustainable differentiation, and collaborating with competitors to increase market size rather than compete to gain small market holds.

Hill, Schilling, and Jones (2017, pp. 53) states that the bargaining power of buyers is high when buyers have a choice, purchase in large quantities, and the supply industry depends upon buyers for a large percentage of its total orders.

Although the buyers of Embraer aircraft, mainly medium sized regional airlines, have a variety of choices given by the firms competitors, the switching costs associated with replacing their current fleet of Embraer aircraft with that of a competitor in order to drive down costs is insurmountably high. Additionally, airlines are in no current economic positioning to feasibly purchase from several manufacturers at once in order to pit Embraer against a rival and again drive down costs. Knowing the economic state of the aviation industry, the bargaining power of airlines is reduced significantly, therefore leading to a low risk.

Embraer purchases their supplies from specialized original equipment manufacturers (OEMs), and then assemble the aircrafts in company plants.

Today, the aerospace OEM industry, particularly jet engine production, is a three- player oligopoly consisting of General Electric, Pratt & Whitney, and Rolls Royce. Due to intense competition resulting in price wars, these suppliers began entering exclusive contracts with aircraft manufacturers in order to improve profits. These exclusive contracts resulted in a bottleneck of production after massive growth and heightened demand of well-funded rivals Boeing and Airbus took off, leaving Embraer to deal with a production shortage issue in 2008.

Though other aircraft parts and equipment can be supplied by numerous other OEMs in the industry and command a lower level of bargaining power, the need for a product such as highly specialized engines are essential to the function of Embraer aircraft. Therefore, the bargaining power of suppliers is moderate to high.

Finally, two forces that may threaten Embraer’s position in the market are complements (fuel) and substitutes. Surging fuel prices have severely impacted profitability of airlines globally, and have forced the elimination or at least reduction of low occupancy routes in order to save their bottom line. Because of this, fuel-efficient aircraft have become a major focus in the aircraft manufacturing industry, which plays in favour of Embraer’s smaller aircraft design and should be taken advantage of by the firm. On the other hand, aircraft have numerous substitutes in alternative transportation, including motor vehicles and trains. Although the current outlook of the market due to the pandemic is seeing travellers choose different methods of travel due to government restrictions, there is no current mode of transportation that outperforms the speed and efficiency of an aircraft. Therefore, the threat of compliments and substitutes remains at a moderate level.

Industry Life Cycle Analysis Embraer’s 10-year market outlook (www.embraer.com) highlights the volatility of the aviation industry in the wake of the pandemic. Embraer will deliver 4,420 new jets through 2029, with only 25% representing new market growth. Though

the industry seems to be declining, and will assuredly feel implications of the pandemic over the long-term, there is hope that the industry will eventually bounce back in the next decade. Embraer currently sit in a mature market, experiencing an economic slump depressing industry demand; opening the door to threats of price wars amongst its rivals in their fight to maintain revenues during this unprecedented time of falling profits.

Macro Environment The most impactful forces of the aircraft manufacturing macro environment comprise of social, passenger demographics, and political and legal forces. Social forces triggered by the COVID-19 pandemic have changed airline passenger behaviours. As more and more of the public have adopted the work from home trend, business travel has become substituted by virtual interactions.

Additionally, passengers have become almost obsessed with their health and safety when travelling; several issues arise with lowered mainstream destinations available as well as facing social rejection if they were to travel. The market outlook (2020, pp. 8) suggests that these temporary behaviours become permanent the longer people endure a particular set of circumstances, giving rise to the threats of lowered demand for aircraft as well as intensified rivalry amongst manufacturers to gain market share.

As the world begins to enter a state of economic decline, discretionary spending from travellers is significantly reduced which greatly impacts the cash flow of airlines—the main customers of aircraft manufacturers. The demographic of travellers within the market is now primarily comprised of wealthy business people, with global annual business travel costs expected to reach $1.7 trillion by 2022 (D. Jovic, 2021); pushing the demand for airlines to secure smaller and more efficient aircraft to serve this demographic.

The political and legal forces surrounding the pandemic have landed a devastating blow on the aircraft manufacturing industry. The continuous changing regulations multiple governments have placed on international travel throughout the world have left airlines struggling to maintain profits, and ultimately led to a decline in aircraft orders.

Though the analysis of the macro environment poses multiple threats, it has also unveiled possible opportunities for the aircraft manufacturing industry. The outlook and positive growth of the regional and business traveller segments present manufacturers with an opportunity to pivot to capture that market hold. Firms must carefully mitigate the obvious threats of the macro environment, changing passenger behaviour and government regulations, in order to avoid detrimental profit loss.

Internal Analysis

Embraer’s main competitive advantage is one of differentiation rather than low cost, as aircraft would never be considered cheap. Relying on the firm’s distinctive competencies in superior quality, efficiency, innovation and customer responsiveness, the firm is able to offer value to customers, which in turn creates profit.

The firm’s long-term survival depends on its ability to produce aircraft with cutting-edge technology to stay ahead of its competitors. Investing 10% of annual revenues into R&D and upgrading their industrial facilities back this innovation focus. These resources are protected by an intellectual property strategy that is closely aligned with the firm’s business strategy; by creating the best possible portfolio of IP assets, Embraer can leverage its partnerships and business opportunities in order to stay competitive. Today, Embraer holds approximately 800 patents in a variety of countries, and regularly cross-license these assets with partners to complement technical expertise (Embraer, Innovation). These barriers to imitation of Embraer’s resources help the firm achieve sustained competitive advantage over the long-term.

Though innovation is at the forefront of Embraer’s competitive advantage, the efficiency of its company infrastructure is less than desirable. Following the cancelled joint venture with Boeing and amidst the pandemic, the firm began a significant restructuring in order to sustain the blows; beginning with the replacement of four vice presidents and a director. Embraer’s move to cut staff in order to survive the plummeting profits led to suspended contracts and reduced working hours, effectively breaking their employee and capital productivity.

Though the global pandemic has been devastating for the firm, Embraer has been working diligently to set up new projects and contracts with other companies in a bid to relinquish the strain of falling profits. Currently, the company has plans to modify their aircraft with advanced HEPA filters to ensure the health and safety of passengers, as well as offering guidance to customers on the transportation characteristics of the COVID-19 vaccine aboard their aircraft.

Despite this interruption in efficiency, Embraer remains strong in its superior quality offerings to customers. The firm’s differentiation of products has allowed it to pivot with the changing industry in order to beat its competitors in the projected new market of regional flying. Embraer’s move away from turboprop aircraft to focus on sleek, efficient and noise reduced regional jets has set it apart from competitors like Bombardier. Offering quieter and more comfortable rides for passengers, airlines have been trading in their outdated turboprop fleet for that of Embraer. The firm also leads the production of world-class business jets, that feature top quality air-control and Wi-Fi connectivity. The superior quality and reliability of Embraer aircraft increases the value the firm offers its customers. If the company is able to increase their efficiency and lower unit costs associated with reliable product offerings, Embraer is set to capture even more competitive advantage over its rivals.

It is clear that Embraer has gone above and beyond in identifying and satisfying their customer’s needs, especially in the volatile market of today’s aviation industry. The firm operates an extensive customer support after-sales service that benefits from recently opened service centers throughout the world. In addition to after-sales service, customer response time is critical to Embraer’s bottom line, as customers only want to purchase from a firm that can guarantee delivery of the product. As mentioned in the external analysis, Embraer has struggled to meet delivery demands in the past. This, coupled with the leaning out of the firms organizational structure, Embraer must do everything in their power to enhance efficiency to meet customer response times.

Through analyzing the internal environment of Embraer, it is clear that the firm has numerous strengths. Customers are responsive to the differentiated products Embraer offers as the aviation industry shifts; see value in their superior quality products and innovation strategies. In order for the firm to maintain its differentiation strategy, Embraer must build upon these strengths.

A number of weaknesses have also been highlighted; the fact that Embraer has recently had to cut a large portion of its workforce in order to survive the effects of the global pandemic, and therefore will struggle to meet the demands of customers in a timely manner is a huge weakness for the firm moving ahead.

Though the company benefits from a decent cash flow and high liquidity despite the turmoil of the past year, the thinning of it’s workforce by almost half will be detrimental to the firm in the long-term if they aren’t able to recover.

Strategic Options In order to rebound from the effects of lost ventures and the pandemic, Embraer must choose a solid strategy moving forward. Operating within an industry that is facing the most unprecedented times in its history, there are three strategic options that Embraer can embrace in order to turn the tide of dismal growth and profit and come out on top of its industry in the face of adversity. Of course, with all three options it is recommended that Embraer do everything it can to reestablish its workforce to full productivity in order to achieve profitable customer responsiveness. The strategies focus on three different areas of potential expansion: geographical, product, and market; Hambrick tables can be seen in Appendix 4.

1. Geographical Expansion: Regional Jets This strategy of market penetration is based on the fact that Embraer is already a global leader in the niche market segment of 90-120 seat jets, and has already sold their regional jets to China Eastern Airlines and China Southern Airlines.

The more contracts Embraer can attain with airlines in areas that posses the infrastructure and route need for regional jets, the more profit the firm will be able to attain. The company should immediately move to make alliances with

Airlines within the Asia Pacific market. These alliances will be well maintained, as they help Embraer achieve market access to the regional jet segment over their competitors, airlines have a need to ‘right-size’ their aircraft fleet in order to meet regional demand, and are unlikely to exploit Embraer’s IP as they operate in different markets of the aerospace industry.

As noted in the internal analysis, Embraer is already strong in the differentiation of their products, and already possesses the product that these airlines will need in order to maneuver through the emerging market demand of airline passengers.

The firm also benefits from a strong competitive advantage of offering superior quality, reliable aircraft. This strategy is particularly beneficial in China and Asia Pacific, as Embraer already has an established distribution and service center in Beijing, allowing airlines in the area to receive excellent customer after-sale support. As Embraer is no stranger to the production and distribution of innovative regional jets, management will have the expertise to execute this strategy. Additionally, Embraer would no longer be competing with rivals on a commercial jet scale; capturing a bigger share of the regional market over competitors that are simply not able to differentiate in the current economy will grow the economies of scale and lower the threat of rivalry as well as the bargaining power of suppliers.

Of course, there are negatives that come with every strategy. The first and most important thing to note is that no strategy will eliminate the threat of new passenger behaviour set by the on-going pandemic. While outlooks support that aviation will shift gears to focus on regional routes over international, there is no way to know the full impact of the pandemic—or even how long government travel regulations will stay intact. Additionally, though Embraer does not hold any significant debt, the need to reduce their workforce and adjust inventory and production in order to preserve liquidity may make deliverance of aircraft in the initial stages of the alliance difficult, and cause the firm to further show their inefficiencies.

2. Product Expansion: Business Jets The second strategy presented is very similar to the first, as it involves the expansion of aircraft that are already designed and produced by Embraer, though the need for alliances to capture new geographical market segments is not needed. As stated in the analysis of the macro environment, wealthy business travellers are set to make up the key demographic of travellers in the coming years.

Embraer estimated that deliveries of business jets could reach 6,400 over the next 20 years (Embraer, Annual Report), with North America receiving the highest amount of deliveries.

To capture this seemingly growing demand, Embraer would use its already differentiated business strategy to continue to create innovative and superior

quality products noted in the internal analysis to meet the demand of the business jet client. As the creator of the worlds most sought after business jets, the Phenom 300E, adopting this strategy would increase Embraer’s stranglehold on the market, while big competitors continue to bleed money through their commercial jet programs. To effectively initiate this strategy, Embraer would need to invest in R&D and contact suppliers in order to implement a just-in-time procurement concept in order for these high-end jets to meet the customer response times expected of high-paying customers.

The negative implications that come with this strategy are, again, it does not eliminate the threat of government travel restrictions. Though customers will enjoy peace of mind in terms of their health and safety aboard a private jet, government restrictions and border closures exist even for the wealthy.

Additionally, this strategy serves such a small demographic of customers, that even if the business jet market were to 6400 deliveries, it pales in comparison to the revenue made from entering markets with a high capacity and demand for regional travel.

3. Market Expansion: Disruptive Technology Venture with Uber The third and final strategy represent a technological paradigm shift of the aviation industry as a whole, brought on by a joint venture between Uber and Embraer to create an ‘air taxi’ product which incorporates the strength of both companies to revolutionize the transportation of every day citizens locally.

Having access to the knowledge on how disruptive technologies can revolutionize markets is a valuable strategic asset to Embraer. The venture also allows the firm to capitalize on leveraging the innovative product in order to gain economies of scale and drive up brand recognition in the general public.

Though both firms possess the technology and infrastructure to support this innovative product, the natural limits of technology could prove to be strenuous particularly on Embraer. Funneling already stringent funds into extensive R&D without seeing a return on investment in the short term due to lack of air traffic management systems and regulations being met could see the rate of improvement performance on the project slow. Because Embraer is a firm of differentiated product offerings, the focus of R&D on this one single product could fail due to the fact that the firm simply does not have the capital to invest while simultaneously trying to support all other areas of operations.

Recommendation and Implementation The chosen recommendation for this report is Option 1 – geographical expansion into the regional jet market of China and Asia Pacific. This strategy was chosen over the other two simply based on its ease of implementation and cost

efficiency. Faced with a challenging and constantly changing industry midpandemic, Embraer has to act responsibly and make choices that will improve profit while lessening their outward cash flow. Due to the fact that the industry is seeing significant demand in the regional route market, the best decision for Embraer is to use its already established regional jets to penetrate the Asia Pacific market, which holds the infrastructure and demand for regional flying.

In order to capture the market strategically, Embraer first needs to focus on the restructuration of its firm to reestablish efficient output and be able to keep up with demand. The first step in the restructuration is to start with the firm’s vertical differentiation in centralization of decision making. Because Embraer is a firm that has different components to its manufacturing system in different locations, all operations need to be coordinated in an effort to increase efficiency. Centralization will also help ensure that the firm’s extensive R&D work is not duplicated and therefore wasting valuable time and money.

Embraer should work to flatten their hierarchy and expand the span of control, and adopt a matrix structure to achieve tight coordination between functions.

All employees at the firm should be aware of Embraer’s goals, and commit to a high standard of performance.

Once the organizational structure of the company has been made efficient, Embraer can confidently market their superior products to the airlines that populate China and Asia Pacific knowing that they have the competency within the organization to meet customer demands and further their reliability through improved customer response times. Once airlines recognize the strength of Embraer’s efficiency, alliances will not be hard to attain. The airlines have the need for small regional jets, and Embraer has to products. Securing long-lasting relationships through continued customer service will solidify Embraer as a top provider of regional jets, and encourage other airlines globally to follow suit.

As with any new strategy there are numerous things that can go wrong. As stated in the strategic option section, the main threats facing any strategy within the aviation industry is the uncertainty of the future impact of the pandemic. If government travel regulations stay in place, regional travel within borders of a country will be a must; but if travel regulations tighten, it could mean the end for the industry as a whole. Similarly, the effects of prolonged regulations and general fear for ones health may have greatly impacted the behaviour of passengers to the point that air travel will no longer be deemed safe. Though this is highly unlikely, it is important to take in all considerations when forming a prudent strategy.

Appendix

1. Embraer Values • • • • • • •

Ethics and integrity are in everything we do.

Our people are what make us fly.

We are here to serve our customers.

We strive for company excellence.

Boldness and innovation are our hallmarks.

We build a sustainable future.

Global presence is our frontier.

(Embraer, Values, pp. 4)

2. Stakeholder Analysis Table

Stakeholders Shareholders; Representatives: Board Customers

People - employees Suppliers

Society; Representatives: Government, surrounding communities, regulators

3. Embraer SWOT Analysis

Needs and expectations (value) Sustainable growth; financial health; economic performance.

Security; availability; performance (products and services); offers/ competitive solutions.

Professional and personal achievement Respect for agreements; (price forecast, payment and sustainability in demand); competence development of the partners; integrity in relationships with sustainability and sustainable growth.

Respect for the environment, health and safety of society; generation of wealth and welfare.

(Embraer, Corporate Procedure, pp. 2)

Strengths • • • •

Global leader in 90-120 seat segment (niche market) Strong R&D Teams Protected IP assets High liquidity

Weaknesses • •

Opportunities • • • •

Regional air traffic recovery and demand The emerging supply chain and regional route market in China Need for balanced fleets Strong business travel market

3. Hambrick Tables

Reduced efficiency due to company overhaul Poor customer response times

Threats • • •

New passenger behaviour Intense competition Government travel regulations

1. Geographical Expansion: Regional Jets Arenas Vehicles Differentiators Staging Economic Logic

Pros

Cons

Engage new customers by moving to serve the regional market of China and Asia Pacific By building alliances with Chinese airlines Use current strategy of differentiation, quality and reliability Immediately look for alliance options with airlines in order to secure continued growth Profits will increase as more contracts with airlines are established and orders for jets come in.

• Distribution center already in place • Existing expertise in 90-120 seat jet production • Airlines need to ‘right-size’ • China and Asia Pacific possess emerging regional route markets • Does not eliminate threat of new passenger behaviour • Does not eliminate government travel regulations • Lowered cash flow and reduced efficiency

4. Product Expansion: Business Jets Arenas Vehicles Differentiators Staging Economic Logic Pros

Cons

Keep current market and focus on serving business jet customers Internal Development, investment in R&D and innovating new technology Use current strategy of differentiation and innovation, quality and reliability Immediately contact suppliers and ramp up R&D Profits will increase as business traveller demographic dominates the industry • Distribution center and production already in place • Captures the growing demand in the business jet market • Leverage high-end product placement to gain wider brand recognition • Does not eliminate threat of government travel regulations • Serving a smaller demographic than usual • Lowered cash flow and reduced efficiency

5. Market Expansion: Disruptive Technology Venture with Uber Arenas Vehicles Differentiators Staging Economic Logic Pros

Cons

References Embraer Company Website:

Entering new markets with disruptive technology Joint venture with Uber.

Use current strategy of differentiation and innovation, quality and reliability.

Immediately contact suppliers and ramp up R&D. Entering a new market will produce more profits and garner brand recognition.

• R&D units already established.

• Captures the growing demand in more efficient local transportation.

• Leverage innovative product placement to gain wider brand recognition • Management systems not yet developed • Low capacity due to social distancing even after COVID has subsided • Lowered cash flow and reduced efficiency

https://embraer.com/global/en/about-us https://embraer.com/global/en/sustainability Financial Statements: https://www.annualreports.com/HostedData/AnnualReports/PDF/ NYSE_ERJ_2018.pdf https://www.embraermarketoutlook2020.com/wp-content/uploads/2020/12/ Embraer_MarketOutlook_8_12_2020.pdf Jovic, D (2021) “Business Traveller Statistics” https://www.smallbizgenius.net/by-the-numbers/business-travel-statistics/#gref https://www.wipo.int/wipo_magazine/en/2017/06/article_0003.html Hill, C., Schilling, M., Jones, G., (2017) Strategic Management: An Integrated Approach, Cengage Learning, Boston, Mass.