3. 1. COMPANY BACKGROUND
SAMSUNG ELECTRONICS
a. Founded in late 1960s and the world’s largest
manufacturer of consumer electronics (television,
memory chip & smartphone)
b. 5th in Most Valuable Global Brands Ranking
c. Galaxy Note 7 was first released in August 2016,
received good reviews and preorder sales soared
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4. 2. CRISIS DESCRIPTION
What Happened?
a. Galaxy Note 7 was launched in August 2016 as
successor to Note 5
b. Reports of property damages and burn injuries
surfaced in US, Korea, China and other countries
c. Airlines around the world banned it from
all flights as it was considered a fire risk
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5. What Happened? (con’t)
d. 1st Informal Recall: Sept 2016
2nd Worldwide Recall: October 2016
e. Total 3.5 million Note 7 devices recalled
f. Sales & production stopped 3 months
after its release
g. Note 7 was officially discontinued
on 11 October 2016
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CRISIS DESCRIPTION
6. “
4 months after the global recall, Samsung
released their findings to explain that the Galaxy
Note 7 had technical flaws in battery design &
manufacturing which ultimately caused the crisis
to happen.
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7. A Florida man filed a 1st lawsuit against
Samsung stating his phone exploded
in his front pocket. He suffered second-
degree burns on his leg
and his thumb.
A man was charging his Note 7 in his Jeep
Grand Cherokee on Labor Day when the
phone exploded causing a fire to his vehicle.
Explosion of Samsung Note 7
caught on camera
https://youtu.be/3fL9qaZXalE
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Situational Evidence
8. 3. CRISIS IMPACT
Financial Loss
a. Global recall cost estimated at US$5
billion in losses.
b. Operating profits dropped by 96% (for
Q3 2016) from the year before.
c. Overall mobile sales dropped by 15% -
US$337 million in lost sales
d. Samsung’s market shares dropped
13.5% y-o-y.
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9. a. Reputation ranking dropped from
7th in 2016 to 49th in 2017.
b. Numerous negative reports mentioned Note 7 was
dangerous and explosive due to the batteries.
c. Images and videos of the damaged Note 7 were widely
shared on traditional & social media.
Memes and jokes were created to mock the brand and
the situation.
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CRISIS IMPACT
Reputation Damage
10. a. Brand Loyalty Affected
Surveys reported 34% of current Samsung owners will not buy
another smartphone from Samsung. Most users were ready to switch
to other Android brands (57%) or iOS (34%).
b. Created Fear & Distrust, Caused Inconvenience
Various airlines prohibited the boarding of passengers carrying Note
7. During every pre-flight safety briefing, Samsung was named and
shamed.
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CRISIS IMPACT
Loss of Customers Trust
11. Internal
a. Employees
b. Managers
c. Major Shareholders
d. Board of Directors
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External
e. Telecom Distributors
f. General Public
g. Customers
h. Media
4. STAKEHOLDERS
12. 12
HIGH Power LOW Interest
Keep Satisfied
Unrelated Govt Agencies
HIGH Power HIGH Interest
Manage Closely
Board of Directors, Major Shareholders
Related Govt Agencies & Regulators
Loyal Customers, General Media
Major Competitors, Airlines & Airports
LOW Power HIGH Interest
Keep Informed
Suppliers, Employees, Creditors
Minor Competitors, Minor Shareholders
Emergency Response
5. STAKEHOLDER POWER-INTEREST MATRIX
LOW Power LOW Interest
Monitor
General Public, Non Samsung Users
13. IMPACT ON KEY STAKEHOLDERS
Airlines & Airports
● Increased Safety Checks
Passengers found in possession of
the Note 7 device were denied
boarding. It was not allowed to be
shipped as air cargo.
Samsung’s Response
Set up customer service booths at high-
traffic airports around the world for
customers to exchange their Note 7 or
obtain refund before their boarding.
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General Media
● Negative Coverage of Crisis
Every news & tech media website
was consistently reporting about
Samsung negatively during the crisis
period.
Samsung’s Response
Maintain transparency towards the media &
general public by holding press conference to
report investigation findings.
