Mitsubishi 2014 Annual Report Download - page 33

Business-Related Risks
Risks that may seriously impact the operating results and/or
financial standing of the MMC Group are outlined below.
Country risk
Overseas sales accounted for around 80% of the MMC
Group’s consolidated net sales for the period. Changes
in the economic, political or social situation in Japan or
in the regions and countries MMC trades with, and in
particular the countries of ASEAN and other emerging
nations which will be central to the company’s regional
strategy, may seriously impact the MMC Group’s operat-
ing results and/or financial standing.
In addition, conducting business operations in
overseas markets exposes the company to latent risks
including, but not limited to, changes in laws and taxes,
changes in the political and economic situation, defi-
ciencies in infrastructure, difficulties in acquiring skilled
personnel, acts of terrorism and other emergencies and
the outbreak of epidemics. In the event risks such as
these start to manifest themselves, they may seriously
impact the operating results and/or financial standing of
the MMC Group.
Intensifying competition
Overcapacity in the auto industry and other factors are
seeing an intensification of competition on a global basis.
Increasing price competition makes sales incentives and
effective publicity campaigns indispensable in promot-
ing sales and retaining market share. Such increases in
price competition and marketing incentives may seriously
impact the operating results and/or financial standing of
the MMC Group.
In addition, as competition in the auto industry inten-
sifies, the development cycle for new products becomes
shorter. In such circumstances, unless the company is
able to offer new products which satisfy price, qual-
ity, safety and other customer requirements, or if the
company’s strategic products are unable to gain suitable
market acceptance, the operating results and/or financial
standing of the MMC Group may be seriously impacted.
Further, unless the MMC Group is able to formulate ef-
fective measures and strategies aimed at maintaining and
increasing its competitiveness, the operating results and/
or financial standing of the MMC Group may be seriously
impacted through a drop in demand for its products.
Natural and other disasters
The MMC Group maintains production and other facili-
ties in Japan and many parts of the world. The occur-
rence of a major natural or other disaster, including
earthquakes, typhoons, fires and epidemics, in these
areas may result in the suspension or other serious inter-
ruption in the operations of the MMC Group or of its
suppliers. MMC has prepared and maintains plans and
measures to keep operations going in areas and under
situations where such risks are high and where they
would have a serious impact on MMC Group operations.
A disaster occurring on a scale larger than anticipated,
however, may seriously impact the operating results and/
or financial standing of the MMC Group.
Changes in laws and regulations
The MMC Group is subject to laws and regulations
governing protection of the environment, product safety
and other matters in the countries where it operates. In
the event that the MMC Group fails to conform to or
is unable to comply with such laws and regulations, or
should such failure lead to sanctions against it, then large
costs may be incurred for the purpose of conforming to
or of complying with any revision, strengthening of or
additions to, these laws and regulations and this may
seriously impact the operating results and/or financial
standing of the MMC Group.
Manufacturing cost
The MMC Group sources parts and raw materials from
a large number of suppliers to manufacture its products.
MITSUBISHI MOTORS CORPORATION
Annual Report 2014 31