Harman Kardon 2007 Annual Report Download - page 24

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Our business could be adversely affected if we are unable to obtain raw materials and components
from our suppliers on favorable terms.
We are dependent upon third party suppliers, both in the United States and other countries, for various
components, parts, raw materials and finished products. Some of our suppliers may produce products that
compete with our products. We use externally sourced microchips in many of our products. A significant
disruption in our supply chain and an inability to obtain alternative sources could have
a material impact on our consolidated results of operations.
Our business could be adversely affected by a strike or work stoppage at one of our manufacturing
plants or at a facility of one of our significant customers or at a common carrier or major shipping
location.
One of our manufacturing facilities in the United States operates under a collective bargaining agreement.
This contract is scheduled to expire in March 2009. Certain of our automotive customers are unionized
and may incur work stoppages or strikes. A work stoppage at our facilities or those of our automotive
customers could have a material adverse effect on our consolidated sales, earnings and financial
condition. In addition, a work stoppage at a common carrier or a major shipping location could also have
a material adverse effect on our consolidated sales, earnings and financial condition.
We may lose market share if we are unable to compete successfully against our current and future
competitors.
The audio and video product markets that we serve are fragmented, highly competitive, rapidly changing
and characterized by intense price competition.
Many manufacturers, large and small, domestic and foreign, offer audio and video systems that vary
widely in price and quality and are marketed through a variety of channels, including audio and video
specialty stores, discount stores, department stores, mail order firms, and the Internet. Some of our
competitors have financial and other resources greater than ours. We cannot assure you that we will
continue to compete effectively against existing or new competitors that may enter our markets. We also
compete indirectly with automobile manufacturers that may improve the quality of original equipment
audio and electronic systems, reducing demand for our aftermarket mobile audio products, or change the
designs of their cars to make installation of our aftermarket products more difficult or expensive.
If we do not continue to develop, introduce and achieve market acceptance of new and enhanced
products, our sales may decrease.
In order to increase sales in current markets and gain entry into new markets, we must maintain and
improve existing products, while successfully developing and introducing new products. Our new and
enhanced products must respond to technological developments and changing consumer preferences. We
may experience difficulties that delay or prevent the development, introduction or market acceptance of
new or enhanced products. Furthermore, despite extensive testing, we may be unable to detect and correct
defects in some of our products before we ship them. Delays or defects in new product introduction may
result in loss of sales or delays in market acceptance. Even after introduction, our new or enhanced
products may not satisfy consumer preferences and product failures may cause consumers to reject our