Resources and Competance, Value Chain
Competitors have claimed that Embraer’s competitive advantage is unfair, sustained only by ongoing direct and indirect government support.while government support was important in helping the firm evolve into a major player in the regional aircraft market, such support has also been available to Embraer’s competitors. Embraer’s success must therefore be attributed to other competitive advantages.
Given its limited resources, especially during the reduction in direct government support, Embraer’s strategy has been to focus its R&D funds on key technologies that it can effectively produce in house. It has outsourced the production of components that other companies can manufacture more efficiently.
Embraer has focused its R&D on the development, systems engineering and integration of the more than 28,000 parts and components that make up an aircraft. The company has also retained the development and production of the plane’s fuselage, arguably the most technically complex part of an airplane. To aid Embraer’s in-house technological development, the company invited international leaders in the field of aeronautics to become minority shareholders.
To offset the risk of developing and producing some of the most costly and technologically challenging components, Embraer has also formed risk-sharing partnerships. Partners make major components such as wings, flaps and engines, based on Embraer’s design specifications. These manufacturers are international firms with headquarters outside of Brazil; however, as Embraer has continued to expand, many of them have set up operations in Brazil to supply parts in a timely and low-cost manner. In 2002, C&D Aerospace of the U.S. built a plant in Brazil to supply Embraer with cabin interiors for its jets. Sonaca, a Belgian company that produces fuselage equipment, instituted Sobraer in Brazil as a subsidiary solely focused on servicing Embraer. Pilkinton Aerospace,...