Case ID: S-0151
Solution ID: 39996

Embraer in China

Case Analysis

In late October 2007, the recently appointed CEO of Embraer and one of the key architects of Embraer's global expansion arrives in Manchuria China to visit the Harbin airplane assembly plant, the result of Embraer's joint-venture with the state-owned Chinese company AVIC II. The Harbin plant was established in 2002 to assemble the Embraer Regional Jet (ERJ) 145, the 50-seat plane used in regional passenger travel. After a disappointing start with only a small number of orders from Chinese airlines, in late 2006, Embraer received 100 orders: for 50 of the ERJ 145s, to be assembled in China and for 50 EMBRAER 190s (a larger, newer 108-seat aircraft), to be exported from Brazil. Still, several challenges lay ahead. AVIC I, the other Chinese state-owned aircraft corporation, was planning to launch a new family of regional jets, the ARJ21 to compete head-on with the EMBRAER 190 family. Also, regional travel in China was still emerging, and the development of new routes was heavily regulated by the government. The CEO must decide what Embraer should do to foster sales in the region, while at the same insulating itself from escalating competition.

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