Fujitsu 2011 Annual Report Download - page 90

on our business results. Examples of such potential risks are
listed below.
1) Price Competition
Changes in market environments, intensifying competition,
technological innovation and other factors may cause prices for
products and services to decline. Anticipating such technology-
and competition-driven price reduction of ICT services, including
cloud computing, and the escalation of PC prices, we are pursu-
ing a variety of measures to reduce costs, including the introduc-
tion of Toyota Production System reforms, the industrialization of
services and standardization, and software modularization, as
well as efforts to expand sales of new products and services.
Despite these steps, the Group still faces the risk of larger-than-
expected declines in prices, as well as being unable to achieve
cost reductions or sales growth due to fluctuations in procure-
ment costs. Any of these risks could negatively impact Group
sales and profitability.
2) Competition from New Market Entrants and Others
In addition to challenges posed by existing industry peers, com-
petition from new market entrants continues to intensify in the
ICT sector. Today, new entrants and other competitors continue to
emerge in market areas where the Fujitsu Group has a competi-
tive advantage, thus entailing the risk that we may lose our
competitive edge, or fail to secure a clear competitive advantage
in future business operations.
3) Competition in Technology Development
Technological advancement in the ICT sector occurs at an
extremely fast pace, leading to rapid turnover in new products
and technologies. In this context, remaining competitive
requires the continuous development of state-of-the-art technol-
ogy. While the Fujitsu Group does its utmost to maintain highly
competitive technologies by expanding into markets such as
cloud computing and smartphones, a loss in competitiveness
versus other companies in the race to develop innovative tech-
nologies could lead to a decline in the Group’s market share and
profitability, which would negatively impact sales and earnings.
Further, sales and profitability could be affected by the develop-
ment of groundbreaking technologies and services by competi-
tors that would severely compromise the value of the Group’s
services and products.
4. Suppliers, Alliances, etc.
In the course of its operations, the Fujitsu Group conducts busi-
ness with a wide range of suppliers and alliance partners.
Accordingly, any significant changes in relationships with these
and other business partners could affect the Group’s business.
1) Procurement
The Fujitsu Group utilizes sophisticated technologies to provide a
range of products and services. There is therefore a risk that we
may encounter difficulties in procuring a stable supply of certain
key components or raw materials, or in cases where regular
supply channels are unavailable, that we may be unable to
secure alternative procurement sources. There is also the risk
that the Group may be unable to sufficiently procure certain
parts or raw materials in the large volumes required. Moreover,
natural disasters, accidents and other events, as well as any
deterioration in business conditions at suppliers, could hinder
the ability of business partners to provide the Group with a
stable supply of required components or raw materials. These
and other events could cause delays in the provision of products
and services, resulting in postponement of deliveries to custom-
ers and opportunity losses. In respect to procurement of compo-
nents and other materials, foreign exchange rate fluctuations,
tight supply and demand conditions, and other pressures could
drive procurement costs higher than initial estimates, leading to
diminished returns on products and services, as well as lower
sales due to the higher prices. Additionally, while we make
every effort to ensure the quality of procured components, we
cannot guarantee that all components purchased will be free of
defects. The discovery of such issues could result in processing
delays, as well as defective products, opportunity losses, repair
costs, and disposal costs for defective goods, plus the potential
obligation to pay damages to customers.
2) Collaborations, Alliances and Technology Licensing
To enhance competitiveness within a global ICT business environ-
ment, the Fujitsu Group works with a large number of companies
through business alliances, technology collaborations, joint
ventures and other means, a practice that we intend to actively
continue in the future. If, however, as a result of managerial,
financial, or other causes, it becomes difficult to establish or
maintain such collaborative ties or to gain sufficient results from
them, the Group’s business could be adversely affected. More-
over, many of our products and services employ other companies’
patents, technologies, software, and trademarks with the con-
sent of their owners. However, there is no guarantee that other
companies will continue to grant or license the right to use their
property under terms acceptable to the Fujitsu Group.
5. Public Regulations, Public Policy, and
Tax Matters
The business operations of the Fujitsu Group are global in scope,
and are therefore impacted by a variety of public regulations,
public policies, tax laws and other such factors in all countries
where the Group does business. Specifically, wherever it operates,
the Group must comply with a variety of government policies,
regulations, such as authorizations for business or investment,
import/export regulations and restrictions, as well as laws pertain-
ing to antimonopoly policies, intellectual property rights, consum-
ers, the environment and recycling, labor conditions,
subcontracting, and taxation. Earnings might be affected by
increased compliance costs associated with measures to make
stricter or otherwise revise such policies, laws and regulations. We
also provide solutions in certain fields and business domains such
as healthcare, communications, and construction that are subject
to other public regulations, meaning that regulatory trends in
these sectors may potentially impact the Group’s business.
FUJITSU LIMITED ANNUAL REPORT 2011088
BUSINESS AND OTHER RISKS