Will the Galaxy Note 7 snafu send Samsung up in flames?
Two weeks ago, Samsung issued a statement that it was ending sales of and voluntarily recalling its new Galaxy Note 7 smartphone after an internal investigation confirmed reports that batteries for the devices were catching fire. Concern about the devices was such that airline passengers in the U.S. and Europe were told not to use the devices during flights. With millions of phones involved in the recall, Samsung’s reputation and stock have taken serious hits despite the company generally getting high marks for its quick response.
In an interview with The Wall Street Journal, Peter LaMotte, senior vice president at Chernoff Newman, said the decision by Samsung to stop sales and issue a recall of more than 2.5 million phones after receiving only 35 incident reports was an effort to reduce the risk of damage to its market and financial positions.
Mr. LaMotte lauded Samsung for its stakeholder messaging, as well.
“Its official statements rely heavily on messaging focused on the concern for the safety of its customers and the inconvenience the recall will create,” said Mr. LaMotte. “Rather than attempting to explain or defend its product or brand, Samsung delivers the announcement succinctly with simple facts of steps that are being taken.”
Despite the kudos for crisis management, Samsung has suffered a major financial blow and has not yet made clear a timetable for handling the recall.
In the meantime, some consumers are still using the Galaxy Note 7. There were reports earlier this week that a six-year-old boy in Brooklyn, NY had suffered burns when one of the phones exploded over the weekend. In its home market of South Korea, Samsung has said it plans to roll out a software update next week to limit the amount batteries can be charged to 60 percent. According to CNN, it is not clear if the fix will be made available elsewhere.
One beneficiary of Samsung’s woes has been Apple, which has gained billions in additional market value following the debut last week of the iPhone 7.
- Official Statement Galaxy Note 7 – Samsung
- Samsung Rushes to Contain Fallout From Galaxy Note 7 Recall – The Wall Street Journal (sub. required)
- Crisis of the Week: Samsung and the Exploding Phone Batteries – The Wall Street Journal (sub. required)
- Samsung to limit battery charging on Galaxy Note 7 phones to prevent fires – CNNMoney
- Samsung Galaxy Note 7 explodes in New York, burns six-year-old boy – Ars Technica
- Apple stock on fire from Samsung’s flames – USA Today
DISCUSSION QUESTIONS: Do you think Samsung’s reputation and financials will take a long-term hit as a result of the problems with the Galaxy Note 7? How would you assess Samsung’s crisis management response to date? What will this mean for Apple’s business and other competitors in the smartphone market?