Oki 2014 Annual Report Download - page 28

26 Annual Report 2014
(3) Market Trends
1. The product and geographical markets in which the OKI Group
operates are subject to frequent entry by new participants
and persistent competition. In an effort to secure competitive
advantage, the OKI Group strives to enhance product develop-
ment and reduce costs. In the event the OKI Group is unable to
implement effective product development and cost rationaliza-
tion measures and fails to maintain and secure suffi cient market
share, its business performance and fi nancial position may be
affected.
2. The performance of Info-Telecom Systems segment is sub-
ject to a variety of factors including: (1) changes in investment
trends by financial institutions due to revisions of financial
regulation, poor performance and other factors; (2) changes
in investment trends by telecommunication carriers owing to
amendments to telecommunication regulations, shifts in busi-
ness strategy and other factors, and; (3) a signifi cant decline in
public-sector investment due to national and local government
policies.
3. The printer market is experiencing intense price competition,
particularly in color printers. In an effort to secure a strong mar-
ket position and profi tability, the OKI Group is endeavoring to
develop new products and reduce costs. Despite these efforts,
continued downward revisions to product prices may impact
the Printers segment’s performance.
(4) Raw Materials and Component Procurement
The OKI Group procures a variety of raw materials and compo-
nents in support of its manufacturing activities. The ability to
ensure timely product shipment, avoid delays in product delivery
and minimize opportunity loss is dependent upon the stable sup-
ply of raw materials, components, specialized parts and alternative
components. The OKI Group’s performance and fi nancial position
may therefore be affected in the event stable supply cannot be
maintained due to natural disasters and other factors.
The OKI Group is reliant upon the direct and indirect supply of
crude oil and materials, such as metals, as a part of its manufacturing
activities. A sharp rise in the price of these and other key materials
may impact the OKI Group’s performance and fi nancial position.
(5) Product Defects and Delays in Delivery
Despite every effort to maintain quality assurance, the OKI Group
is unable to eliminate all possibility of product and service defects.
In the event of a product or service defect, the OKI Group may be
liable for damages. In addition, any incidence of defect may impact
the OKI Group’s reputation and standing and contribute to a drop in
demand. In either case, the OKI Group’s performance and fi nancial
position may be affected.
While the OKI Group adopts complete and thorough measures
to ensure the timely delivery of its products and services, unfore-
seen incidents in design, material procurement and production
control may lead to a delay in shipment. In this case, the OKI
Group may become liable for the payment of damages.
(6) Success or Failure of Strategic Alliances
The OKI Group is aggressively engaged with other companies in
strategic alliances in research and development, manufacturing,
sales and other activities. While the OKI Group only enters into
and maintains such alliances with the utmost caution, there may
in theory be instances where the OKI Group is not able to obtain
the desired cooperation from the strategic partner in business
strategy, production and technical development, fund procurement
or other activity, or where the alliance does not yield satisfactory
results. The OKI Group’s performance and fi nancial condition may
be adversely affected by such an event.
(7) Overseas Business Activities
The OKI Group is engaged in manufacturing and sales activities
across a variety of countries and regions. Accordingly, it is sub-
ject to a number of risks specifi c to overseas business activities,
including country risk and foreign currency fluctuation risk. The
OKI Group operates production sites in Thailand, China, and Brazil.
The OKI Group’s performance and fi nancial position may therefore
be affected in the event of economic recession, political turmoil,
movements in local currency exchange rates and unforeseen cir-
cumstances in either of these countries.
To minimize foreign currency fluctuation risk, the OKI Group
enters into forward currency and currency swap contracts to ad-
dress fluctuations of the yen against the U.S. dollar and euro.
However, the OKI Group cannot guarantee the complete removal
of risk, and abrupt fl uctuations in foreign currency exchange rates
in particular may affect the OKI Group’s performance and fi nancial
position.
(8) Patents and Intellectual Property
The OKI Group strives to protect its patents and to secure new
patents with the aim of differentiating the OKI Group from its com-
petitors. Failure to do so may impact the performance of relevant
businesses. The OKI Group is also active in securing the necessary
approvals and authorization from third parties for the use of exter-
nal patents required in the development and manufacture of new
products. In the event the OKI Group is unable to secure patents
or rights, or secures patents or rights under unfavorable terms and
conditions, its performance and fi nancial position may be affected.
The OKI Group endeavors to comply with patents held by third
parties. It is not, however, in a position to completely guarantee the
OKI Group will not violate intellectual property rights held by anoth-
er party. In the event the OKI Group is involved in a claim relating to
the violation of intellectual property rights, it is likely to incur legal
and other expenses. In the event the OKI Group is found to have
breached intellectual property rights held by another party, then it is
likely to incur damages. In either event, the performance and fi nan-
cial position of the OKI Group may be affected.
(9) Statutory and Regulatory Compliance
The OKI Group is subject to statutory and regulatory require-
ments, business and investment application and approval, export
restrictions relating to national security and other factors, import
regulations including customs and taxation and a variety of govern-
ment ordinances in each of the countries and regions in which it
operates. The OKI Group is also subject to statutory and regulatory
requirements relating to commerce, antitrust, patents and intellec-
tual property rights, taxation, foreign currencies, the environment
and recycling. In the event the OKI Group is unable to comply with
any of the aforementioned or any unexpected changes occur,
the possibility exists that its activities would be restricted or sus-
pended. Accordingly, the aforementioned and other statutory and
regulatory requirements may impact the OKI Group’s performance
and fi nancial position.