Mazda 2009 Annual Report Download - page 48

Significant risks that could affect the Company’s business results and financial position include those listed
below. This, however, does not represent a comprehensive list of all the risks faced by the Mazda Group at the
current time.
1. Economic Conditions Impacting the Mazda Group
The Mazda Group sells products in Japan and around the world, including in North America, Europe and Asia.
An economic downturn or declining demand in these markets could adversely affect Mazda’s business results
and financial position.
2. Exchange Rates
The Mazda Group exports products from Japan to the rest of the world and consequently its business results and
financial position are exposed to the effects of fluctuations in exchange rates. An appreciation of the yen, particu-
larly against the U.S. dollar and euro, could lower the Mazda Group’s profitability and ability to compete on price.
Mazda uses forward-exchange contracts and other instruments in some of its transactions to minimize the impact
of short-term exchange rate risk. However, a weakening of the yen could result in opportunity losses.
3. Alliances and Mergers
The Mazda Group is involved in joint activities with other companies under technology alliances, joint ventures and
in other forms with respect to the development, production and sales of products. These joint activities are
designed to optimize resources, facilitate their prioritization and generate synergies. However, a disagreement
over management, financial or other matters between the parties involved could mean that the joint activities fail to
deliver the results expected. This could adversely affect the Mazda Group’s business results and financial position.
4. Laws and Regulations
The Mazda Group’s operations in each country where it does business are subject to various government regu-
lations such as those pertaining to environmental issues, automobile safety, fuel consumption and exhaust
emissions. Compliance with new regulations could result in substantial additional costs, which could adversely
affect Mazda Group’s business results and financial position.
5. Market Competitiveness
The Mazda Group competes with a large number of companies in the global automobile market. Maintaining
and enhancing the Group’s ability to compete in this environment is crucial to ensuring growth. Consequently,
the Mazda Group is implementing a range of initiatives to boost its competitiveness in product development,
manufacturing, sales and other areas. However, the Mazda Group’s business results and financial position
could be affected in the event that it fails to launch appealing products at opportune times, due to a failure to
accurately ascertain market trends or as a result of issues related to technological capabilities and manufac-
turing. The same holds true if the Mazda Group fails to take effective steps to respond to customer values
or changes thereof, including declines in market share or product prices, through its dealership network or
sales methods.
6. Procurement of Materials and Parts
The Mazda Group relies on numerous suppliers outside the Group for the procurement of materials and compo-
nents. However, due to tight supply–demand balances, constraints at suppliers, or changes to and breaches of
supply contracts, the Mazda Group may face difficulties in procuring the necessary level of materials and
Business Risks
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