Yamaha 2011 Annual Report Download - page 33

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Annual Report 2011
Risk Factors
1 Economic Conditions
The Yamaha Group has a global business presence and therefore is
subject to the influence of economic conditions in Japan and other
countries. Recessions in world markets and accompanying declines in
demand may have a negative effect on the Group’s business results
and the development of its business.
2 Price Competition
The Yamaha Group confronts severe competition in each of its busi-
ness segments. For example, in the musical instruments segment, the
Company is a comprehensive manufacturer of musical instruments
and sells high-quality, high-performance instruments covering a broad
price spectrum. However, the Company confronts competitors in each
musical instruments segment, and competition in the lower price seg-
ments has become more intense, especially in recent years.
Also, in the AV/IT segment, the Yamaha Group is subject to
competition from low-priced products. Changes in logistics and distri-
bution and new technology trends could expose this business to even
greater price competition, which could have an impact on the Group’s
current strong position.
3 New Technology Development
The Yamaha Group will focus its management resources on the busi-
ness domains of “musical instruments, music, and audio.” The Group
will firmly establish itself as the world’s leading comprehensive musical
instruments manufacturer. The AV/IT segment has been expanded,
with a focus on AV receivers in the AV products category. The electronic
devices segment has also been expanded, mainly in the area of sound-
generating LSIs, a core operation in the semiconductor business.
Differentiating the Group’s technologies in the fields of sound,
music, and networks is essential for the Group’s further development
and growth. In developing these technologies, if the Group does not
continue to correctly forecast future market needs and adequately
meet them, the added value of its products in the musical instruments
segment will decline, which may lead to price competition. As a result,
the Group may be unable to stimulate new demand for its products
and may find it difficult to sustain the AV/IT and electronic devices
businesses.
4 Business Investment
The Group makes business investments including capital investments
to promote business growth. However, when making investment
decisions, even though the Group monitors investment return and risk
both qualitatively and quantitatively and makes careful, considered
judgments, depending on circumstances, the Group may be unable to
recover a portion or the full amount of its investments, or may decide
to withdraw from a business, thereby resulting in additional losses.
In such cases, the value of assets invested in such businesses may be
subject to impairment.
5 Business Alliances
In recent years, partnership strategies, including alliances, joint ventures
and investments in other companies, have increased in importance for
the Group. In some cases, the anticipated effects of such alliances and
investments may not materialize because of conflicts of interest, or
changes in the business strategies of the partner, or other reasons.
6 Dependence on Materials and Parts Business Customers
The semiconductors, automobile interior wood components, and
materials and parts that the Group manufactures and sells are affected
by the business performance of the manufacturers who buy them.
When the bonds of trust between such customers and Group compa-
nies are impaired by delivery, quality, or other issues, this may have a
negative impact on future orders. Moreover, customers may ask Group
companies to compensate them for quality problems or other defects.
7 International Business and Overseas Expansion
The Yamaha Group has established a global presence, with
manufacturing and marketing bases in various parts of the world. Of
the Group’s 78 consolidated subsidiaries, 39 are foreign corporations,
of which 17 are manufacturing companies, with principal bases of
operation in China, Indonesia, and Malaysia. Overseas sales comprise
52.0% of the Group’s net sales.
Various risks, including those listed below, are inherent to the
expansion of business overseas. If such risks materialize, including
adverse effects caused by an over-concentration of manufacturing
facilities in a particular region, the Group may not be able to provide
stable supplies of its products. Such risks include:
Among the matters covered in this annual report, items that may have a material impact on the decisions of investors
include those listed and described below. In addition, information related to future events as described in the text are
based on judgments made by the Yamaha Group at the end of the fiscal year under review.