As I scroll through the #IS6621 news feed I see countless mentions of Samsung’s recent debacle. Since this is current news topic, for my next blog post I want to analyze the smartphone industry and some of its players, specifically Samsung. In light of their world-wide production holt in the most highly touted smart phone, The Galaxy Note 7, Samsung can potentially be in trouble. The Galaxy Note7 – deemed by many to be the best smart phone of its kind – will now go down in history as the worst. How did this happen and what will be the immediate and long-term effects?
Before I am able to dive deeper into this blog, I first want to give some context to the Samsung story to be able to identify where issues started and how they were fixed. You can find a full history of the Galaxy Note7 here, but I will briefly summarize the main points. August 19th the Galaxy Note7 is released and briefly after (5 days) the release reports surface that the phone has some issues. In September, Samsung announces a voluntary return program to recall phones in an exchange program. They expected the phone had a faulty battery and discontinue business with the battery company. As October rolls around the ‘replacement phones’ are malfunctioning and finally Samsung final stops all sales and production of the Galaxy Note7
The Galaxy Note7 was Samsung’s high end smart phone that was supposed to compete with the new Apple iPhone 7. Samsung’s competitive advantages are its market leading technologies in displays and memory chips. These technological innovations have allowed Samsung to compete with Apple. Essentially, Apple and Samsung are the only two large players in the high end smart phone market. With the recalling of all Note 7s and the stoppage in production, Samsung is expecting damages of over $4 billion in lost income from. The financial impact of the crisis is half of the mobile divisions profits from the previous year. So, where is the blame? Many reports state that Samsung rushed their highly innovative product into the market before it was ready. They wanted to get an edge on Apple and the iPhone 7 release. In result, their product wasn’t ready. Many speculators question Samsung’s inability to detect what caused the fires as a lack of connectedness in their supply chain. When the recall took place, Samsung should have been able to identify what was causing the fire in these phones and fix the issue. However, the refurbished phones were still malfunctioning.
“Experts say that problems in the supply chain can be exacerbated when different departments within a corporation, and their suppliers, fail to communicate or coordinate effectively” (WSJ).
This is an issues to the public. As international firms outsource their product, they sacrifice quality and communication. Marketers, designers and executives all may have different opinions on their product and its readiness. This is where supply chain problems can occur, through lack of communication. With current technology, companies should be able to trace problems and communicate between different branches rather easily, but Samsung obviously is having issues. I think that it is another issue that Samsung has not made many public statements about their phone problems. Samsung has new executive leadership that is attempting to feel their way through this crisis.
Why is this important?
Samsung biggest problem is not from the financials from the Note 7s fallout, but from the loss of consumer confidence, credibility and trust in its brand – “When trust is tarnished, it is hard to earn it back” (WSJ). As stated earlier, Samsung has not made many public statements on this situation. Essentially, Samsung’s lack of a PR presence has made them look a lot worse. In todays society, Samsung should have already employed many tactics to restore customer satisfaction and trust. As a result, customers are flocking to other smart phones devices; like Google, who just recently released their new product. Samsung’s problems are a great opportunity for the Pixel – Google’s new release – to have a better impact on the market. Many believe Google can capitalize if they are present at retail stores and meet the growing demand for their product. Apple is also capitalizing of Samsung. High end smart phone users who were on the fence between the two products now may shift over to Apple because they are a trusted brand.
What should be done?
Samsung has started offering a $100 credit rebate for turning in their Galaxy phones. This is a response to get consumers to purchase another Samsung model phone and stick with the company. This is a step in the right direction, but Samsung needs to do more. To begin, their management needs to show that it is strong in this stage of the crisis. They need to issue more public statements about how they are addressing and fixing the problems. They need to apologize to the public to try and win back customers. Also, it is important that Samsung protects their brand. They additionally need to show that their supply chain is fully operational and connected. Lastly, Samsung needs to get back to what they do best, continuing producing innovative phones that compete with Apple. So they need to put more focus on their next product.