Toshiba 2012 Annual Report Download - page 81

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TOSHIBA Annual Report 2012
RISK FACTORS RELATING THE GROUP AND ITS BUSINESS
The business areas of energy and electronics, the Group's main business areas, require highly advanced technology for
their operation. At the same time, the Group faces fierce global competition. Therefore, appropriate risk management is
indispensable. Major risk factors related to the Group recognized by the Company are described below. The actual
occurrence of any of those risk factors may adversely affect the Group's operating results and financial condition.
The risks described below are identified by the Group based on information available to the Group as of June 22, 2012
(the date of the filing of the Annual Securities Report) and involve inherent uncertainties, and, therefore, the actual results
may differ. The Group recognizes these risks and makes every effort to avoid the occurrence of these risks and minimize
any impact from them when they occur, by maintaining the proper risk management.
1. Risks related to management policy
(1) Strategic concentrated investment
In response to the issues that the current global economy faces, such as the increase in demand for energy or the rise in
the price of resources, which are associated with the growth and expansion of emerging economies, and mass capacity
growth of the information transmission and/or storage and the ensuring of the information security, the Group proposes
a comprehensive solution through the construction of smart communities, by combining and integrating effectively the
respective technologies in which the Group has an advantage. In addition, the Group makes strategic concentrated
investment in the categories of total energy innovation, such as power generation systems, renewable and new energy,
power electronics/EV and home solutions, and total storage innovation, such as HDD/SSD, NAND flash memory, health
care solutions, retail solutions and digital products solutions. In areas such as System LSIs, the Group is also restructuring
and selectively allocating resources. While it is essential to allocate limited management resources to high growth areas
or areas in which the Group enjoys competitiveness, in order to secure and maintain the Group's advantages, the areas in
which the Group makes concentrated investments may not grow as anticipated, the Group may not maintain or
strengthen its competitive power in such areas, or the relevant investments may not fully generate the anticipated level
of profit. In order to avoid such risks, the Group is conscious of capital costs and of the need to conduct careful selection
of investment items and to enhance progress management. Alongside these efforts, the Group also aims to achieve
growth through allocation of strategic resources and to reinforce its financial base, by means of thorough implementation
of comprehensive management of all relevant investments that reflect the nature of each individual business. Further to
this, the Group also makes every effort to utilize external resources through strategic business alliances where necessary.
(2) Success of strategic business alliances and acquisitions
The Group actively promotes business alliances with other companies, including the formation of joint ventures and
acquisitions, in order to grow new businesses in research and development, production, marketing and various other
areas. If the Group has any disagreement with its partner in a business alliance or an acquisition in respect of financing,
technological management, product development, management strategies or otherwise, such business alliance may be
terminated or such acquisition may not have the expected effects. In addition, the Group's operating results and financial
condition may be adversely affected by additional capital expenditures and provision of guaranties to meet the
obligations for such partnership business that may be incurred due to the deterioration of the financial condition of the
partner, as well as for other reasons. Based on these assumptions, the Group pays careful attention to optimizing business
formation to secure correspondence to the nature of the relevant business.
(3) Business structure reformation
The Group as a whole is taking measures to reform its business structure, in order to continue and deepen the
establishment, through self-transformation, of the business quality by which it can ensure a stable profit, not susceptible
to a changing environment, and there is a possibility that the Group will incur expenses for business structure reform in
this connection. Although there is a possibility that the Group's operating results or financial condition may be affected in
the event of the failure of such program to produce the expected results, the Group has reduced the accumulated total
fixed costs for 3 years in the amount by 1,500 billion yen, and, in addition to developing resistance to exchange rate
fluctuations mainly by expansion of overseas production/overseas procurement, the Group has realized a substantial
reduction in costs by promoting the unification of design, manufacturing and procurement.
(4) Measure for defense against hostile takeover
The Company has introduced a plan outlining countermeasures that may be taken against any large-scale acquisitions of
the Company's shares (the “Takeover Defense Measures”). If an entity making a large-scale acquisition of the Company's
shares does not comply with the procedures under the Takeover Defense Measures, the Company will counteract by
making a gratis allotment of stock acquisition rights (shinkabu yoyakuken) under the Takeover Defense Measures.
Although such Takeover Defense Measures were introduced for the purpose of protecting and enhancing the corporate
value of the Company and the common interests of its shareholders, they may limit the opportunities for the shareholders
of the Company to sell their shares to hostile acquirers.