Casio 2010 Annual Report Download - page 21

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Annual Report 2010
Business Risks
The management performance, financial position and share price of The Company are subject to the following
risks. We have prepared a list of items that might have an impact on the forecasts included in this report as of the
consolidated reporting period ended March 2010.
1) Japan’s economy and the global economy
The Group’s products are sold in Japan and in markets around the world, and demand is thus subject to the
economic trends of each country. Given that the majority of our products are marketed to consumers, the Group is
especially affected by trends in consumer spending.
2) Downward pressure on product prices
In the industries in which the Group is active, competition is intensifying as many companies make aggressive efforts
to increase their shares in Japan and in overseas markets. There is the possibility that a rapid decline in product prices
will have a negative impact on the Group’s business performance.
3) New products
In the event that the Group is unable to speedily bring to market popular new products at a steady pace, or in the
event that competitors release products similar to those being launched by the Group, especially in the case where
the launch of competing products coincide, there is a possibility that the Group may see an erosion of the competi-
tive advantage achieved as part of the first-mover advantage enjoyed by the pioneer of a new product.
4) Transactions with major customers
Any changes in strategy or product specifications made by major customers, and any cancellation of orders, or
changes in their schedule, could have a negative impact on the earnings performance of the Group.
5) Outsourcing
With the aim of improving the Group’s production efficiency and the operating income margin, we have outsourced
a substantial portion of our manufacturing and assembly work to outside service suppliers. There is a risk, however,
that quality control will become difficult to enforce. Moreover, problems may arise concerning violations of laws,
regulations, and intellectual property rights of third parties, by the outside supplier. Such occurrences could have a
negative impact on the Group’s earnings performance, and might possibly hurt the product’s reputation.
6) Technology development and changes in technologies
In those business areas in which the Group is active, the pace of technological development is quite rapid and the
swift pace at which the market’s needs evolve brings with it the risk that the Group products may be rendered
obsolete more quickly than expected. This, in turn, would cause an unexpected sudden sharp decline in sales.
7) Risks associated with international developments and overseas operations
The majority of the Group’s production and sales activities take place in locations outside Japan. Consequently,
overseas political and economic developments and revisions of laws and legislation may have a significant impact
on the Group’s financial position. In particular, the amendment of laws or the enactment of new laws in foreign
countries is difficult to predict, and such developments might have a negative impact on the Group’s earnings
performance.