Embraer’s Shareholders Core Competencies

Core Competencies

Mauricio Botelho was appointed by Embraer’s shareholders as its new CEO in mid of 1995. The company was freshly shifted from a government owned to private. This was a critical leap regarding the company’s new CEO ability to scale and to redraw its strategic objectives. To put his turnaround plan into action, Botelho decided to tackle three major initiatives over five years into the future. The action plan included a workforce reduction and incentives, restructuring the organization around the customer and finally outsourcing its non-core services.

The first stage involved the restructuring of the top management team, by bringing in half the senior managers from outside and promoting the rest from within. Botelho believed that the company would more likely be successful when managers first understood the fundamental business/strategic problem or opportunity that their company faces. It was all about re-shaping the business portfolio across Embraer’s different internal departments, by developing effective strategies for growth and downsizing. As a result, the management team was able to clearly identify the so called strategic business units (SBU) that make up the business. The outcome was now clear, Embraer decided to put stronger resources into its most competent employees by launching an incentive program which distributed the equivalent of a 3 months salary and to phase down on the weaker one.

The second step was about restructuring the organization around the customer. Botelho saw that Embraer’s culture was very short-sighted and inward looking. He also acknowledged the mistake of paying more attention to the specific product rather than to the benefits and experiences produced by these products. Becoming a customer centric organization is not an easy challenge, Embraer understood that in order to scale and diversify their market offerings, it needed to go to greater length to gain a better understanding about customer needs, wants and demands. Based on that, the company conducted a survey of about 50 airlines to collect real and relevant information about the customers interests and dislikes. The survey results made Botelho confident in how to go about seeking the next opportunity and aligning Embraer’s mission on creating customer value in order to capture value from customers in return.

The final strategy initiative involves the outsourcing of non-core services. Embraer’s organization boundaries were redrawn as basic supplies such as catering, security, training, specialized technical services and even basic manufacturing and assembly were outsourced to the company’s extensive partner network. Botelho understood that having a viable business, Embraer had to emphasize on effective communication and building stronger relationships with its suppliers. As a result, quality and speed were significantly improved, meanwhile Embraer devoted itself to put more focus on what it considered its core business which includes in-house design and development as well as the aircraft’s lifetime service provision.