Xerox 2014 Annual Report Download - page 30

We face significant competition and our failure to compete successfully could adversely affect our results
of operations and financial condition.
We operate in an environment of significant competition, driven by rapid technological developments, changes in
industry standards, and demands of customers to become more efficient. Our competitors range from large
international companies to relatively small firms. Some of the large international companies have significant
financial resources and compete with us globally to provide document processing products and services and/or
business process services in each of the markets we serve. We compete primarily on the basis of technology,
performance, price, quality, reliability, brand, distribution and customer service and support. Our success in future
performance is largely dependent upon our ability to compete successfully in the markets we currently serve, to
promptly and effectively react to changing technologies and customer expectations and to expand into additional
market segments. To remain competitive, we must develop services, applications and new products; periodically
enhance our existing offerings; and attract and retain key personnel and management. If we are unable to compete
successfully, we could lose market share and important customers to our competitors and that could materially
adversely affect our results of operations and financial condition.
Our profitability is dependent upon our ability to obtain adequate pricing for our products and services and
to improve our cost structure.
Our success depends on our ability to obtain adequate pricing for our services and products and that will provide a
reasonable return to our shareholders. Depending on competitive market factors, future prices we obtain for our
services and products may decline from previous levels. In addition, pricing actions to offset the effect of currency
devaluations may not prove sufficient to offset further devaluations or may not hold in the face of customer
resistance and/or competition. If we are unable to obtain adequate pricing for our services and products, it could
materially adversely affect our results of operations and financial condition. In addition, our services contracts are
increasingly requiring tighter timelines for implementation as well as more stringent service level metrics. This
makes the bidding process for new contracts much more difficult and requires us to adequately consider these
requirements in the pricing of our services.
We continually review our operations with a view towards reducing our cost structure, including reducing our
employee base, exiting certain businesses, improving process and system efficiencies and outsourcing some
internal functions. We from time to time engage in restructuring actions to reduce our cost structure. If we are
unable to continue to maintain our cost base at or below the current level and maintain process and systems
changes resulting from prior restructuring actions, it could materially adversely affect our results of operations and
financial condition.
In addition, in order to continually meet the service requirements of our customers, which often includes 24/7
service, and to optimize our employee cost base, we often locate our delivery service centers in lower-cost
locations, including several developing countries. Concentrating our delivery service centers in these locations
presents a number of operational risks, many of which are beyond our control, including the risks of political
instability, natural disasters, safety and security risks, labor disruptions and rising labor rates. These risks could
impair our ability to effectively provide services to our customers and keep our costs aligned to our associated
revenues and market requirements.
Our ability to sustain and improve profit margins is dependent on a number of factors, including our ability to
continue to improve the cost efficiency of our operations through such programs as Lean Six Sigma, the level of
pricing pressures on our services and products, the proportion of high-end as opposed to low-end equipment sales
(product mix), the trend in our post-sale revenue growth and our ability to successfully complete information
technology initiatives. If any of these factors adversely materialize or if we are unable to achieve and maintain
productivity improvements through design efficiency, supplier and manufacturing cost improvements and
information technology initiatives, our ability to offset labor cost inflation, potential materials cost increases and
competitive price pressures would be impaired, all of which could materially adversely affect our results of
operations and financial condition.
15