Toshiba 2014 Annual Report Download - page 102

14 TOSHIBA Annual Report 2014
Management's Discussion and Analysis
easily replaced [if the need to do so arises]. In cases of delay or other problems in receiving supply of such materials,
components and other goods, shortages may occur or procurement costs may rise. It is necessary to procure materials,
components and other goods at competitive costs and to optimize the entire supply chain, including suppliers, in order
for the Group to bring competitive products to market. In addition, a shortage in the electric power supply resulted from
the suspension of the operation of nuclear power plants in Japan and a further rise in electricity costs due to the rise of
fuel costs affected by exchange rate fluctuations may affect business activities, including manufacturing operations, of
the Group, since a stable supply of electricity is essential to the Group’s business activities.
Any failure by the Group to procure such materials, components and other goods from key suppliers or any shortage in
the power supply or further rise in electricity costs may impact the Group’s competitiveness. Furthermore, any case of
defective materials, components or other goods, or any failure to meet required specifications with respect to such
materials, components or other goods, may also have an adverse effect on the reliability and reputation of the Group and
Toshiba brand products.
(2) Securing human resources
A large part of the success of the Group’s businesses depends on securing excellent human resources in every business
area and process, including product development, production, marketing and business management. In particular,
securing the necessary human resources is essential in respect of achieving globalization of the Group’s businesses.
However, competition to secure human resources is intensifying, as the number of qualified personnel in each area and
process is limited, while demand for such personnel is increasing. As a result, the Group may fail to retain existing
employees or to obtain new human resources. In order to reduce fixed costs, the Group is implementing personnel
measures, including the reallocation of human resources to focus on strong and promising businesses, reclaiming jobs
that are outsourced to third parties or conducted by limited-term employees, reducing the number of limited-term
employees implementing a leave system, and reducing overtime through a review of working systems. However, fixed
costs may not be reduced as anticipated or the implementation of such personnel measures may adversely affect the
Group’s employee morale, production efficiency or the ability to secure capable human resources.
4. Risks related to products and technologies
(1) Investments in new businesses
The Group invests in companies involved in new businesses, enters into alliances with other companies with respect to
new businesses, and actively develops its own new businesses.
Cultivation of new businesses entails substantial uncertainty, and if any new business in which the Group invests or
which the Group attempts to develop does not progress as planned, the Group may be adversely affected by incurring
investment expenses that do not lead to the anticipated results. In order to avoid these risks, the Group makes every
effort to resolve various technological issues and to develop and capture potential demand effectively in the new
business development process.
5. Risks related to trade practices
(1) Parent company’s guarantees
When a subsidiary of the Company accepts an order for a large project, such as a plant, the Company, as the parent
company, may, at the request of the customer, provide guarantees with respect to the subsidiary’s performance under
the contract. Such parent guarantees are made pursuant to standard business practices and in the ordinary course of
business. If the subsidiary subsequently fails to fulfill its obligations, the Company may be obligated to bear the resulting
loss. The Company makes every effort to conduct appropriate management by periodically monitoring the subsidiaries’
fulfillment of the contract requirements and by cooperating with such subsidiaries where necessary.
6. Risks related to new products and new technology
(1) Development of new products
It is critically important for the Group to offer innovative and attractive new products and services. However, due to the
rapid pace of technological innovation, the emergence of alternative technologies and products and changes in
technological standards, the optimum introduction of new products to the market may not be accomplished, or new
products may be accepted by the market for a shorter period than anticipated. In addition, any failure on the part of the
Group to continuously obtain sufficient funding and resources for development of technologies may affect the Group’s
ability to develop new products and services and to introduce them to market.
From the viewpoint of enhancing concentration and selection of managerial resources, the Group now selects research
and development themes more rigorously, with a primary focus on developing original and advanced technologies, with
close consideration for the timing of market introduction. More rigorous selection of research and development items
may impair the Group’s technological superiority in certain products and technological fields. In order to avoid these
risks, the Group intends to enhance the efficiency of research and development activities by sharing intellectual property
through the promotion of common platforms and using overseas resources more efficiently in system development.