Embraer Economic Analysis

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In a 1969 the Brazillian government funded the creation of an aeronautics company called Empresa Brasileira de Aeronáutica S.A.. This company, today known as Embraer, started off making ground attack planes for the government and has evolved over the years into a well known force in the commericial, executive, and military sectors of the aircraft industry. When the company was privatized in 1994 a period of fairly steady growth ensued until 2009. Although Embraer is the number four producer of commercial aircraft in the world the global economic crisis of 2009 still forced management to make some tough decisions. After seeing its profits fall 36% last year, Embraer was forced to lay off 20% of its workforce. Embraer’s chief executive has expressed his belief that Executive Jets along with defense contracts are the key to making it through the tough economic times. He projects these two aspects will account for half of the companies revenue. It is clear then that Executive Jets are a good barometer for the overall success of the company. The smaller, more efficient aircraft is the trademark of Embraer’s success. In 2009 when the global ecnomic crisis hit sales fell by a substantial amount. Executive jets are normal goods so the overall decrease in consumer income along with fewer buyers led to a sharp decrease in demand. Another factor that causes demand to shift left is the tastes and preferences of the buyer. During rough financial periods people tend to look down on Executive Jets as unnecessary and overkill. This change in peoples tastes and preferences could also factor into the decrease in demand. This fall in demand is represented graphically by the demand curve’s shift to the left. As a result of demand shifting left a surplus is created at the existing price. So at this point quantity supplied exceeds quantity demanded. The spokesman for Gulfstream,

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