Fujitsu 2012 Annual Report Download - page 92

3. Competitors/Industry
The ICT sector is characterized by intense competition and fast-paced
technological innovation. Events within the industry or actions by
competitors could therefore have a substantial impact 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,
competition from new market entrants continues to intensify in
the ICT sector. Today, new entrants continue to emerge in
market areas where the Fujitsu Group has a competitive advan-
tage, 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 technolo-
gies. In this context, remaining competitive requires the continu-
ous development of state-of-the-art technology. While the Fujitsu
Group does its utmost to maintain highly competitive technolo-
gies by expanding into markets such as cloud computing and
smartphones, a loss in competitiveness versus other companies
in the race to develop innovative technologies could lead to a
decline in the Group’s market share and profitability, which would
negatively impact sales and earnings. Further, sales and profit-
ability could be affected by the development of groundbreaking
technologies and services by competitors 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 deteriora-
tion 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. The Fujitsu Group has
taken a variety of measures to strengthen the resiliency of its
supply chain, including moving to multiple sources for procure-
ment, working on, or strengthening support for, business conti-
nuity management (BCM) initiatives of suppliers, and holding a
sufficient supply of inventories. Despite these efforts, inadequate
supplies of parts and raw materials could cause delays in the
provision of products and services, resulting in postponement of
deliveries to customers and opportunity losses. In respect to
procurement of components 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. Addition-
ally, while we make every effort to ensure the quality of procured
components, we cannot guarantee that all components pur-
chased will be free of defects. The discovery of such issues could
result in processing delays, as well as defective products, oppor-
tunity 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 per-
taining to antimonopoly policies, intellectual property rights,
consumers, the environment and recycling, labor conditions,
090 FUJITSU LIMITED ANNUAL REPORT 2012