Slide1: International Business
April 20, 2004
Josh Mahlandt General Information: General Information -Largest country in South America
-Comparable in size to the U.S.
-Official Language is Portuguese
also speak Spanish, English, and French Government: Government -Federative Republic
-President Luiz Da Silva
Elected January 1, 2003
-Executive: President and V.P. serve 4 yr. terms
-Legislative: Federal Senate and Chamber of Deputies
-Judicial: Supreme Federal Tribunal Economy Overview: Economy Overview -Free Enterprise with some state intervention
-Large agricultural, mining, manufacturing, and service sectors
-Outweighs that of all other S. American countries
-Plagued with high inflation rates in past 20 yrs.
Now steadily decreasing
-Unemployment remains a major problem The Brazilian Real: The Brazilian Real -Official Currency of Brazil
-Formerly pegged to U.S. dollar
-Now floats independently with respect to U.S. dollar.
-Exchange Rate: 2.92 reals per U.S. dollar Brazilian Reals to 1 U.S. Dollar Gross Domestic Product (GDP): Gross Domestic Product (GDP) -Purchasing Power Parity: $1.376 trillion
Ranks 11th worldwide
-PPP per capita: $7,600
*Services 56% GDP Growth 1995-2003 Brazilian Trade: Brazilian Trade -Trade Surplus!
-iron ore, soybeans, coffee, footwear, autos
-Major Partners: U.S. 24% Argentina 9%
-machinery, chemical products, oil
-Major Partners: U.S. 23% Argentina 13% Comparative Advantages: Comparative Advantages -Huge territorial extent with plenty of natural resources
-Large population with a dynamic & fast growing consumer market
-Economic integration with Mercosul
-Developed industrial center with diversified exports
-Stability of democratic political institutions
Brazilian Industrial Sectors: Brazilian Industrial Sectors -Petroleum and Petrochemicals
-Aircraft and Aerospace Embraer: Embraer -Fourth largest aircraft manufacturer in the world.
-Close to overtaking third largest manufacturer, Bombardier.
-Started in 1969 by Brazilian government.
-Privatized in 1994.
-Based in Sao Paulo, Brazil.
-Started trading on NYSE on July 21, 2000.
Company Profile: Company Profile -Embraer manufactures commercial, military and corporate airplanes.
-Provide aircraft that are economical to acquire and operate
-Gained success by focusing on regional jets with 37-50 passenger capacity.
-Known for aggressive management and marketing and for having competitive prices and services.
-Gained market share by undercutting competitors’ prices in regional jet market.
Regional Aircraft Products: Regional Aircraft Products -Regional aircraft operations primarily involve the development, production, and marketing of commercial jet aircraft and providing related support services.
-Largest customers include Continental Express and American Eagle.
-Competitors include Bombardier, Boeing, and Airbus.
-EMB 120 Brasília
Defense Aircraft: Defense Aircraft -Operations involve research, development, production, modification and support of military defense aircraft, products and related systems.
-Primary customer is the Brazilian Air Force although aircraft has been sold to the United Kingdom, France, and Mexico.
-Competitors include Raytheon, Lockheed-Martin, and British Aerospace.
-EMB 312 Tucano and Super Tucano
-P 99 Corporate Jet Segment-The Legacy: Corporate Jet Segment-The Legacy -Line of corporate jets based on ERJ 135 regional jet model.
-Designed to provide customers with a cost-effective alternative to commercial regional airline travel.
-Marketed to businesses in two models:
-highly customized interior based on the customer's specific requirements
-Corporate shuttle version
-partially customized and is generally intended to have business class-type seating and in-flight office design features.
Other Related Businesses: Other Related Businesses -After-sales customer support services and the manufacture and marketing of spare parts for products.
-Activities include the sale of spare parts, maintenance and repair, and training.
-Provide structural parts and mechanical and hydraulic systems to Sikorsky Corporation for its production of helicopters.
-Limited manufacture of executive aircraft and crop dusters.
Keys to Success: Keys to Success -Low costs
-Brazil’s low labor costs.
-Easy access to natural resources such as iron ore to make steel.
-Brazil’s weak currency has made Embraer’s products more competitive on the international market.
-Repair and accident records rival those of competitors.
-Strong customer service and training.
-Easy customer access to parts.
-Low maintenance costs. Keys to Success(cont.): Keys to Success(cont.) -Strong management
-CEO Mauricio Botelho known in Brazil as a long-term strategic planner.
-Partially owned by a Brazilian financial group, Bozano, and a group of European aerospace companies.
-Favorable taxes and tariffs.
-Controversial because it has drawn
complaints from the company’s rivals.
-Canadian government has complained to the WTO on behalf of Bombardier. Embraer’s Future: Embraer’s Future -Effects of the War on Terror
-Experienced a significant decline in stock prices after 9/11.
- The company could end up benefiting in the long-run.
-Since most airlines are looking to cut costs, Embraer’s low-cost products are more attractive.
-Embraer focuses on regional jets for domestic airlines, which have not been targeted by terrorists thus far.
-Decline in air travel has led more companies to explore to opportunities of corporate jets, which is a key market for Embraer.
-An increase in the demand for military aircraft in smaller countries could increase Embraer’s military sales. Embraer’s Future(cont.): Embraer’s Future(cont.) -Short-run success will depend on the number of Embraer’s exports and the continued weakening of the Real.
-Long-run success will depend on how well the company’s new line of 70 and 100 seat aircraft performs.
-Competing directly with Boeing and Airbus in the large commercial aircraft market is a huge risk for Embraer.
-Embraer’s success also depends on the airline industry as a whole.
-An increase in terrorist attacks and a decline in air travel could have a negative effect on sales.