Casio 2011 Annual Report Download - page 17

15
Annual Report 2011
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 2011.
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.
8) Intellectual property
The Group principally uses proprietary technologies, and protects these
proprietary technologies through a combination of patents, registered
trade marks and other intellectual property. The following is a list of
accompanying risks.
• Competitors might develop the same technologies as the Group’s
own proprietary technologies
• Denial of approval for a pending patent submitted by a Group
member
• Ineffectiveness of measures aimed at preventing the misuse or
violation of intellectual property rights held by a Group member
• Legislation relating to intellectual property might not provide
adequate protection for the Group’s intellectual property
• The Group’s future products and technologies might constitute a
violation of another company’s intellectual property rights
9) Defective products and lawsuits
As a manufacturer and marketer of consumer products, we ensure strict
quality control for our products. To date, we have never been subject to
a damaging claim and have never had our reputation endangered. Even
so, it is impossible to ensure that claims regarding product liability and
product safety will not be brought against the Group members in the
future.