Panasonic 2010 Annual Report Download - page 54

operating results and financial condition. The decrease in the
value of Japanese stocks may also reduce stockholders’
equity on the balance sheet, as unrealized holding gains
(losses) of available-for-sale securities are included as part of
accumulated other comprehensive income (loss).
Risks Related to Panasonic’s Business
Competition in the industry may adversely affect
Panasonic’s ability to maintain profitability
Panasonic develops, produces and sells a broad range of
products and therefore faces many different types of competi-
tors, from large international companies to relatively small,
rapidly growing, and highly specialized organizations.
Panasonic may choose not to fund or invest in one or more of
its businesses to the same degree as its competitors in those
businesses do, or it may not be able to do so in a timely
manner or even at all. These competitors may have greater
financial, technological, and marketing resources than
Panasonic in the respective businesses in which they compete.
Rapid declines in product prices may adversely affect
Panasonic’s financial condition
Panasonic’s business is subject to intense price competition
worldwide, which makes it difficult for the Company to deter-
mine product prices and maintain adequate profits. Such
intensified price competition may adversely affect Panasonic’s
profits, especially in terms of possible decreases in demand.
Amid accelerating changes in the structure of markets, such
as a demand shift to emerging markets and lower-priced
products, and market expansion of environmental and energy-
related businesses, Panasonic’s product prices in digital elec-
tronics and many other business areas may continue to
decline significantly.
Panasonic’s business is, and will continue to be,
subject to risks generally associated with international
business operations
One of Panasonic’s business strategies is business expansion
in overseas markets. In many of these markets, Panasonic
may face risks generally associated with international manu-
facturing and other business operations, such as political
instability, including terrorist attacks and abduction, cultural
and religious differences and labor relations, as well as eco-
nomic uncertainty and foreign currency exchange risks.
Panasonic may also face barriers in commercial and business
customs in foreign countries, including difficulties in timely
collection of accounts receivable or in building and expanding
relationships with customers, subcontractors or parts suppli-
ers. Panasonic may also experience various political, legal or
other restrictions in investment, trade, manufacturing, labor or
other aspects of operations, including restrictions on foreign
investment or the repatriation of profits on invested capital,
nationalization of local industry, changes in export or import
restrictions or foreign exchange controls, and changes in the
tax system or the rate of taxation in countries where Panasonic
operates businesses. With respect to products exported over-
seas, tariffs, other barriers or shipping costs may make
Panasonic’s products less competitive in terms of price.
Expanding its overseas business may require significant invest-
ments long before Panasonic realizes returns on such invest-
ments, and increased investments may result in expenses
growing at a faster rate than revenues.
Panasonic may not be able to keep pace with
technological changes and develop new products or
services in a timely manner to remain competitive
Panasonic may fail to introduce new products or services in
response to technological changes in a timely manner. Some
of Panasonic’s core businesses, such as consumer digital
electronics and key components and devices, are concen-
trated in industries where technological innovation is the cen-
tral competitive factor. Panasonic continuously faces the
challenge of developing and introducing viable and innovative
new products. Panasonic must predict with reasonable accu-
racy both future demand and new technologies that will be
available to meet such demand. If Panasonic fails to do so, it
will not be able to compete effectively in new markets.
Panasonic may not be able to develop product formats
that can prevail as de facto standards
Panasonic has been forming alliances and partnerships with
other major manufacturers to strengthen technologies and the
development of product formats, such as next-generation
home and mobile networking products, data storage devices,
and software systems. Despite these efforts, Panasonic’s
competitors may succeed in developing de facto standards for
future products before Panasonic can. In such cases, the
Company’s competitive position, business, operating results
and financial condition could be adversely affected.
Panasonic may not be able to successfully recruit and
retain skilled employees, particularly scientific, technical
and management professionals
Panasonic’s future success depends largely on its ability to
attract and retain certain key personnel, including scientific,
technical and management professionals. Industry demand for
skilled employees, however, exceeds the number of personnel
available, and the competition for attracting and retaining these
employees is intense. Because of this intense competition for
skilled employees, Panasonic may be unable to retain its exist-
ing personnel or attract additional qualified employees to keep
up with future business needs. If this should happen,
Panasonic’s business, operating results and financial condition
could be adversely affected.
52 Panasonic Corporation 2010
Risk Factors