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Embraer SWOT & PESTLE Analysis

ID : 52355053 | Apr 2018

COMPANY PROFILE - Embraer

Business Sector : Aerospace and Defense

Operating Geography : South America

About Embraer : Embraer is a Brazilian aerospace industry giant which manufacturers aircraft which specialises in designing and manufacturing aircrafts and selling them to defence, commercial and security markets. Their main clients are Brazilian air force and other armed forces from the countries in Europe, Asia and Latin America as of 2017.

Embraer Revenue : US $ 6.2 Billion – FY ending Dec 2016

Competitive Analysis of Embraer

The SWOT analysis for Embraer is presented below:
Strengths
Weaknesses
1. Global Leader in 90-120 seats segment
2. Strong Research and Development Teams
3. Presence in over 60 countries
4. Leading Defence Aircraft Manufacturer
1. Performance in North America is weaker when compared to other parts of the world
2. Slow growth rate for executive jets market
Opportunities
Threats
1. Joint Ventures with other aircraft manufacturers
2. The emerging defense market in Africa
1. Chinese local aircraft manufacturers and regulations in china
2. Intense Competition

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Detailed SWOT Analysis of Embraer

 

Strength

1. Global Leader in 90-120 seats segment: Embraer E-series aircrafts have been performing really well over the segment. The capacity varies from a 50 seats to 120 seats and the demand for the smaller size aircraft is really good. Embraer is the global leader for the 90-120 seats segments. Despite the scheduled new products in the future, the sale of the first generation of E-Jets, mostly the E175 and E190 models, has been beyond expectations with previous years. This reflects customers’ preference for these airplanes and establishes the decision of offering the aircraft sector within this capacity, within one family. Embraer finished 10 years of its service in 2016 and Embraer Executive Aviation celebrated the sales and delivery of its 1,000th jet, a Legacy 500. The model was also approved for operations at London City Airport, one of the most restrictive landing sites in the world.

2. Strong Research and Development Teams: Embraer have established teams in the South American region with the vision to work with and encourage the organisation that are developing new and progressive technologies and business models that can significantly lay a positive impact on the aerospace industry in the future. Embraer’s R&D team recorded an expenditure of 14.2 Million US$ in the third quarter of 2017, with a total expenditure of 50 Million US$ in the entire year. This gives an indication of the money that company expects to generate in future and better their services.

3. Presence in over 60 countries: Embraer is present in over 60 countries and that is a huge reach. Embraer has a hard pushing sales team that is aggressively trying to capture new clients. Embraer is the third largest aircraft manufacturer in the world with a net income of 21.43 Billion Brazilian Real (R$). Embraer aircrafts are sold in USA, Ireland, France, Portugal, UAE, Singapore, China, and Mexico to name a few. As a part of a study, Embraer found out that every ten seconds, there is an Embraer Aircraft which takes off in some part of the world or the other.

4. Leading Defence Aircraft Manufacturer: Embraer Defence & Security plays a strategic role in the Brazilian defence system and is the segment leader in Latin America. The A-29 Super Tucano turboprop was the business unit’s best-selling model for the year and already serves 13 air forces in tactical support missions, counterinsurgency operations, advanced training and surveillance. Such success stories are many for Embraer and their contribution for the Brazilian defence and other Latin American Countries.

Weakness

This section is available only in the 'Complete Report' on purchase.

Opportunity

1. Joint Ventures with other aircraft manufacturers: Embraer is in talks with Boeing for a joint venture and the talks are still in progress, if this is the case and Embraer goes ahead with the joint venture, it will be a great step for the organisation to move into new territory and gain expertise in heavy aircrafts and interrupt the current status quo in the developing markets.

2. The emerging defence market in Africa: The African countries are the next big emerging markets for the entire world and for an organisation like Embraer, it is one of the most emerging markets, as the countries are continuously trying to strengthen their air force and Embraer can capitalize on their excellent sales force to tap new markets such as Egypt, South Africa and Nigeria.

Threat

This section is available only in the 'Complete Report' on purchase.

References

1. Embraer Annual Report 2016:https://www.embraer.com/relatorio_anual2016/en/clientes.htm

2. https://www.embraer.com/relatorio_anual2016/en/acionistas.htm

3. https://embraer.com/global/en/defense-and-security

4. https://embraer.com/global/en/executive-aviation

5. https://www.reuters.com/article/us-embraer-m-a-boeing/boeing-embraer-talks-have-not-settled-question-of-control-sources-idUSKBN1ER0RB

6. https://www.reuters.com/article/us-china-aviation-regional-analysis/regional-jet-makers-eye-china-market-boost-but-obstacles-loom-idUSKBN14803E

7. http://www.embraermarketoutlook2017.com/world-regions/north-america-rethinks/#from-strength-to-strength

8. https://corporatejetinvestor.com/wp-content/uploads/2015/10/1-The-state-of-the-business-jet-market-2015-20120.pdf

9. https://goo.gl/fy2SSB (Shortened URL for article)

The PESTLE/PESTEL analysis for Embraer is presented below:
Political
Economical
1. Political Stability of countries in Africa and Middle East
2. High level of corruption in defence contracts
1. Intervention in the free market
2. Stability of the Macroeconomics Factors
Social
Technological
1. Class structure, hierarchy and power structure in the society
2. Varying corporate culture practices
1. Technological developments by Embraer competitors
2. New Defence Technologies and Modern Warfare
Legal
Environmental
1. Policies for international Trade and Foreign Investment in Military
2. Change in tax laws and regulations
1. Steps towards the cleaner environment
2. Hybrid Fuels and Better Design
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Detailed PESTLE Analysis of Embraer

 

Political

1. Political Stability of countries in Africa and Middle East: With increasing disturbance and proxy war going on in the middle East, the prior Ottoman empire, causes unrest and also inhibits the proxy was going on between USA and Russia. Even the political stability in African nation is also a cause of worry and potential business, both, for Embraer. The need for their defence aircraft go high, but the executive aircrafts sales will go down. Embraer need to focus on these cases and make decisions accordingly.

2. High level of corruption in defence contracts: Defence sector deals are often embroiled in corrupt practices and bribery. Further, Brazil is currently 79th in the least corrupt nations of all the world and corruption makes it difficult to deal with government entities for business and also leaves a trail of bad name for the company, therefore it is a challenge for Embraer to do business ethically and responsibly. Embraer executives were accused of giving $3.4 million bribe to a Dominican official for an airplane deal with the Dominican Republic. The company executives were also implicated in wrongdoing in deals with wrongdoing in deals with Saudi Arabia, India and Mozambique from 2007 to 2011. This inspired a corruption probe into US and Brazil operations of the company and Embraer had to pay $205.5 million in settlement with U.S. and Brazilian authorities.

Economic

1. Intervention in the free market: This depends on the nature of the economy of the country where country where Embraer wants to conduct its business, if the country is allowing external players to come and compete or restricting them, or the policies are in favour of local players like in China, or they are welcomed to establish their name in other countries. All these Economic factors will impact Embraer’s future business decisions.

2. Stability of the Macroeconomics Factors: Macroeconomics factors play a very important role in company’s decisions to open a business or not. Upcoming Financial laws and regulation and stable taxation system all provides a better environment for moving into a business. Embraer has identified in its annual financial reports about the areas where the growth rate (GDP growth rate) is greater than the world average and there are plans to expand into those markets. As per the report, the world average of annual growth rate is 2.3%, whereas Embraer is targeting with higher than average growth rates, for example, Libya, Ethiopia, China and India.

Social

1. Class structure, hierarchy and power structure in the society: Class, Structure and Power structure of people will determine the influence people will have on the company, it also impacts the demand of personalised jets and executive aircrafts, thereby impacting Embraer’s business. All the Top executives in Middle east/Asia prefer personalised smaller jets. These insights give business to Embraer and give the opportunity to grow. For Example, Embraer has a huge clientele in UAE including the Etihad airlines and other Arab Organisations, while the North American counterparts usually lease private jets to fly down their higher managers.

2. Varying corporate culture practices: Social and business conventions determines the business policies or the business approach the companies will follow and thereby impacting the business of Embraer. With Presence in over 60 countries and being the third largest aircraft manufacturer of the world, it becomes a necessity for Embraer to be sensitive to the cultural needs of its market, how their clients in different countries and different airlines and military representatives will respond to their product and services. Social convention also defines the flying needs of the businesses which directly impacts the Embraer’s market of small seat jets.

Technological

This section is available only in the 'Complete Report' on purchase.

Legal

This section is available only in the 'Complete Report' on purchase.

Environmental

This section is available only in the 'Complete Report' on purchase.

References

1. Embraer Annual Report 2016:https://www.embraer.com/relatorio_anual2016/en/clientes.htm

2. https://tradingeconomics.com/brazil/corruption-rank

3. https://www.embraer.com/relatorio_anual2016/en/sociedade-e-meio-ambiente.htm

4. https://embraer.com/global/en/environment

5. https://embraer.com/global/en/defense-and-security

6. https://embraer.com/global/en/innovation

7. https://embraer.com/global/en/sustainability

8. https://embraer.com/global/en/social-responsibility

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Embraer SWOT and PESTLE analysis has been conducted by SAURABH CHANDRA and reviewed by senior analysts from Barakaat Consulting.

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