A
PROPOSAL
BY
HALEY CARSON
PROJECT
A CASE STUDY: SAMSUNG PUBLIC RELATIONS CONTROL AND COMMUNICATION ON THE GALAXY NOTE 7 EXPLODING BATTERIES
In the summer of 2016, Samsung was ecstatic to release the anticipated Galaxy Note7 along with additional accessories to accommodate the phone in August 2016. It was set to be the most advanced Samsung phone released yet with increased security functions, a smart pen for easier writing and notetaking, and a resistance to water. Soon after the anticipated release of the newest edition to the smartphone industry, 35 incidents of battery cell issues concerning the Galaxy Note7 were reported globally through the Samsung newsroom on September 2. They stopped selling the phone on this day and the replacement opportunity was announced for those who currently had a Galaxy Note7. Tensions and defective battery counts continued to climb as Samsung struggled to navigate the recall notion worldwide. With media still circling the issue regarding the batteries today, it is important to understand the totality of the Samsung Galaxy Note7 crisis and develop a better comprehension of the prevalent disaster that Samsung is still incurring currently.
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On August 19, 2016, the newest edition to the Samsung collectio collection n called the Galaxy Note7 took the market as the official first day of public sales. Customers could pre-order the phone starting on August 3, 2016, with exclusive offers bundled in addition (Samsung unveils the new Galaxy Note7: The smartphone that thinks big, 2016). The phone was anticipated to break records for Samsung as they had beaten their business opponent, Apple to the release of their 7th generation phone (Selyukh & Hu, 2016).
The Galaxy Note7 is the best phone we’ve ever built, and it’s made even better by the ecosystem of Samsung devices that support and enhance it. - TIM BAXTER president of Samsung Electronics America On August 24, 2016, reports of customers who had purchased the Samsung Galaxy Note7 claim of battery defections, only six days after the initial release date (Kwon & Mullen, 2016). Samsung releases their first official statement on September 2 through their newsroom. The statement acknowledges 35 cases worldwide of Note7 battery defects and called to officially end the sale of just-released Galaxy Note7 ([Official ([Official Statement] Galaxy Note7, 2016). In a different report on the same day, the U.S. Product Exchange Program offers customers the ability to get a new Galaxy Note7 with improvements in the next week or the ability to exchange the current Galaxy Note7 for a Galaxy S7 or Galaxy S7 edge with the replacement value given back to them. Consumers with select outlets were also able to receive a $25 gift card or bill credit when choosing a Galaxy S7 family device or the Galaxy Note 7 within the exchange program (Samsung announces U.S. availabilit availability y of replacement Note7 devices as part of voluntary recall, 2016). Within the following week, customers were strongly urged to shut down their Galaxy Note7 phones as a precaution and participate in the exchange program. This week was also when Samsung announced that the United States Consumer Product Safety Commission (CPSC) was actively getting involved in the situation as a public safety issue (Samsung confirms engagement with Consumer Product Safety Commission in response to Note7 battery issue, 2016).
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In a newsletter dated for later in the September week, Samsung announces the improved updated Note7 replacement phones on September 21, 2016, for those participating in the exchange program and estimated around 500,000 new Note7 replacement devices available were available for exchange (Samsung Galaxy Note7 U.S. voluntary recall update, 2016). The new phones will be equipped with a new update that displays a green bar indicating the phone is now safe for use and the battery issue has been resolved. The update also for older Galaxy phones encourages users to power down their devices and participate in the exchange program. In the early start of October when more issues with batteries, even on the "new and safe" Galaxy Note7 phones arisen, it caused Samsung to extend their original recall status and the exchange program to the customers with new or replacement Galaxy Note7's. This meant that customers were eligible for up to a $100 total bill credit for those customers who exchanged a Note7 for another Samsung smartphone or another option was to receive a $25 total bill Samsung credit for a customer who exchanges a Note7 for a refund or other branded smartphone (Samsung expands recall of Galaxy Note7 devices to include original and replacement devices, 2016). The next day on October 14, 2016, the U.S. Department of Transportation decided to ban all Galaxy Note7 phones devices on carry-on and checked baggage on flights as a safety standard (Jansen, 2016). Communication Communicati on efforts became more sporadic at this time, as Samsung seems to bring other products into the light and focus on positive publicity publicity efforts. Updates are still encouraging customers who have not yet returned their faulty devices to power down as soon as possible and participate in the exchange program. In early December, Samsung takes a more aggressive approach to reach the 7% of customers who have not yet returned their Galaxy Note7 products. With an update launched on December 19 and will prevent any Note7 phones from being able to receive a charge and work effectively (Samsung taking bold steps to increase Galaxy Note7 device returns, 2016).
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After a quiet month on the Galaxy Note7 crisis, the U.S. Department of Transportation decided to remove the Galaxy Note7 screening precaution on January 10 due to over 96% of the defective phones being returned (FAA lifts airline notification on Galaxy Note7, 2017). As the dust settles, Samsung estimates that they had to recall 2.5 million of the Galaxy Note7 phones during the incident, affecting customers all over the world (Mullen & Kwon, 2016). While not only was Samsung's brand at stake and continues to be so, but customers wonder if they can ever be faithful in a product from Samsung again. The following case study digs deeper into the Samsung disaster and analyzes how and if their communication efforts were successful throughout the crisis.
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HISTORY OF SAMSUNG Est. 1938
Samsung, known for its widespread electronics takeover, was originally created on March 1, 1938, by Byung-Chull Lee in Taegu, Korea (Kovach, 2013). The company had quite different products than it does today, as during that time it was a food exporter that shipped products like dried fish and flour to Manchuria and Beijing, China (About Samsung, 2008). In just over a decade, Samsung- which translates in English to mean "three stars" from Korean- would have its own flour mills and confectionery machines, machines, sales operations and manufacturing. The company goes on to eventually evolve into a global corporation that still bears the same name today but with a completely different brand identity (About Samsung, 2008). In 1958, the company was acquired by Ankuk Fire & Marine Insurance acquired which was soon renamed Samsung Fire & Marine Insurance in October in 1993 (About Samsung, 2008). This caused Samsung to expand its corporate boundaries into insurance and it also ventured into textiles during this time (Kovach, 2013). Samsung did not start in the electronic realm until the creation of Samsung Electronics in 1970 with the release of their first black and white television (Kovach, 2013). They later expanded into the home electronics goods section that year with their washing machines, microwaves, and refrigerators. The company continued to develop within the electronic sector during the 1980s with the adaption to colored TVs, personal computers, tape recorders, and more (Kovach, 2013). This was also the time where Samsung started to venture into North America by exporting products there. Staring in the 1990s, Samsung focused more on producing hard drives and memory cards personal computers use which still is one of Samsung’s main attraction products today (Kovach, 2013). During that same time, Samsung began to emerge into the mobile industry, creating its first internet-ready phone in 1999 (Kovach, 2013). Just before the move into mobile, Samsung also created the world's first mass-produced digital TV in 1998 (Kovach, 2013). Samsung has since expanded its horizons to a plethora of categories in electronics, with a focus on televisions, smartphones, and tablets. In 2010, Samsung followed the trail of the Apple IPhone and released the first Android Galaxy S smartphone of a series (Kovach, 2013).
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Mission, Vision, Values Est. 1938
Samsung continues to make a better world through diverse businesses such as advancing technology, semiconductors, skyscraper and plant construction, petrochemicals, fashion, medicine, finance, hotels, and more. The accompanying company, Samsung Electronics,, leads the global market in high-tech electronics manufacturing Electronics manufacturing and digital media (Welcome to Samsung, n.d.). “As stated in its new motto, Samsung Electronics' vision for the new decade is, "Inspire the World, Create the Future.” This new vision reflects Samsung Electronics’ commitment to inspiring its communities by leveraging Samsung's three key strengths: “New Technology,” “Innovative Products,” Products,” and “Creative Solutions.” -- and to promoting new value for Samsung's core networks -- Industry, Partners, and Employees. Through these efforts, Samsung hopes to contribute to a better world and a richer experience for all. As part of this vision, Samsung has mapped out a specific plan of reaching $400 billion in revenue and becoming one of the world’s top five brands by 2020. To this end, Samsung has also established three strategic approaches in its management: “Creativit “Creativity,” y,” “Partnership,” and “Talent.” Samsung is excited about the future. As we build on our previous accomplishments, accomplishments, we look forward to exploring new territories, including health, medicine, and biotechnology. Samsung is committed to being a creative leader in new markets and becoming a truly No. 1 business going forward (Vision & mission, 2008).
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Company Reputation Est. 1938
A company’s reputation is an important factor in a stakeholder’s decision to join or endorse the company. The stakeholders are an influential aspect of the company’s public, so it is important to have reliable credibility and a solid reputation. Before the scandal, Samsung had been held to a high standard, as the company was ranked by The Reputation Institute’s Institute’s RepTrak®100 as the leader in corporate reputation. This was held to several different criteria including corporate social responsibility, innovation, innovation, product and services excellence, and creating a great workplace environment (Samsung ranked #1 technology company in U.S. survey of corporate reputation, 2015). Samsung Electronics was also ranked by the Reputation Institute as the most reputable technology company in the United States (Samsung ranked #1 technology company in U.S. survey of corporate reputation, 2015). According to Forbes, the company was also pocketing $195 billion in sales, $22 billion in profits, and $210 billion in assets as of 2015. Samsung followed Apple as the leading market share as of 2015 (Chen, 2015). The Harris Poll, a United States ranking system that rates reputations of the top 100 most visible companies, ranked Samsung as the 7th most visible company in 2016. After the recall, however, the plummeted to the 49th most visible company as of 2017 ratings from The Harris Poll (Rahim, 2017). Throughout the recall process, the company was estimated to have lost around $5 billion (Rahim, 2017). The company still needs time to recover from the recent recall of the Galaxy Note7 before the reputation of the company, at least the Samsung Electronics division to be recognizable as a dominant force in the market once more.
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Public Response Est. 1938
The Galaxy Note7 recall was not the first step piece to the Samsung crisis that occurred in 2016. The company had received backlash from concern Note7 users via all social media platforms regarding their smoking smartphones. With a rise in social media platforms, the concerned people desperately wanted to grasp the attention of the corporation and they hoped that they could reach the company through these outlets. As social media is a public platform for all viewers to see content published, the steaming battery issue took a turn for the worst with bystanders and apathetic publics immediately jumping to join in the crisis fuel. Although Samsung kept a constant stream of updates regarding the issue, people continued to be hesitant when considering the brand. The hesitancy still resumes today as the crisis broke national and eventually global status. The public is unsure on whether to re-trust the brand that allowed smoking and defective batteries to be sent to the common publics and whether if their phones would also have issues. Despite the hesitancy, the public demonstrated reliance to the Samsung brand with the pre-order numbers of the Galaxy S8 smartphones. Examples of public responses through various platforms:
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Public Response Est. 1938
Examples of public responses through various platforms:
Image from The Sun
Image from Techwalla
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Media Response Est. 1938
The media has kept a watchful eye throughout the development of the Samsung Galaxy Note7 crisis. The media relentlessly created articles and content regarding their speculations on what went wrong with the phones as well as anxiously anticipating anticipating a cause for the smoking batteries issue. The issue was covered throughout all platforms such as print, social media, and public relations news releases in order to keep customers as well as other important publics aware of the situation. While the public relations team of Samsung kept their following up-to-date up-to-dat e through their newsroom, they were also readily available through all of their social medias to aid concerned customers. The media was also able to speculate the impending impact of the recall on the company’s brand value as well as how much revenue the company has lost as a result. The media also currently still updates on the crisis in order to inform those who have been following the crisis as well as in the hopes that the official defect in the battery and how it occurred will be released. With the constant pressure from the press, Samsung felt an obligation not only to its influential publics but also the media to discover the truth behind the defective batteries. Near the end of January 2017, the media and the public finally met heir demanding quest for answers. Koh Dong-jin, president of Samsung’s mobile communications communications business blames the defect of batteries on the unique flaws in the design of the phone that included an unusually thin lining between the electrodes of the battery (Note7 fires caused by battery and design flaws, Samsung says, 2017). Examples of media responses through various platforms:
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Media Response Est. 1938
Examples of media responses through various platforms:
Image from New York Times All images demonstrate the vast and diverse feedback the company was getting from various media outlets. The response was both negative and positive in regards to how the issue was handled as well as how to improve their methods for their reputation's sake.
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Business Impact Est. 1938
Prior to the release of the Galaxy Note7 and the crisis beyond that, Samsung previously held the 22% share of the global smartphone market in the three-month period ending June 30, 2016, according to research firm IDC (Mullen & Kwon, 2016). With almost $25 billion knocked off from the company's market value in less than two weeks- during the first two weeks of September- the company took a huge loss in the financial and business aspect from the crisis (Mullen, 2016). Samsung still retains the number one global smartphone market share, but the Galaxy Note7 did take its toll on the U.S. portion of the company. Apple moved up to the number one position of the U.S. market share during the 4Q16, pushing Samsung to second with 17.8% of the U.S. market share with Apple moving up to hold 17.9% of the share (Gartner says worldwide sales of smartphones grew 7 percent in the fourth quarter of 2016, 2017). The crisis also allowed foreign competitors in China to propel their business ventures with new phone releases, taking away again from Samsung’s share in that market. Samsung competitors moved up to the number one holder of the market in China, which originally before the Galaxy Note7 situation Samsung had done well in that market (Gartner says worldwide sales of smartphones grew 7 percent in the fourth quarter of 2016, 2017). During the recall, some people were given new Galaxy Note7’s to replace their old with a believed new and improved battery. Unfortunately, the new phones were also defective in battery function and this caused the Department of Transportation (DOT) to ban the Note7 on airplanes due to passenger safety while the exploding phones were still allowed on board (Lopez, 2017). The company, with the value of recalling 2.5 million phones that were sold, was estimated to have lost around $9.5 billion in revenue after abandoning the Note7 and was also estimated that it lost around $5.1 billion in profits (Mullen, 2016). Although these numbers estimate disaster, Samsung was able to take these imperfections of their products and strive to do better. Samsung took the challenge of their battery defects head on when they decided to build a new test lab to discover what went wrong. The lab was staffed with 700 researchers, 200,000 defective devices and defective 30,000 batteries in an attempt to replicate the cause of fires in the Galaxy Note7’s (Lopez, 2017). They were able to discover what exactly caused the batteries to overheat and explode as well as identify the different mechanism that would trigger the battery overheating. A P R I L
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Image from Samsung newsroom demonstrating the exact cause of the crisis after testing thousands of devices from their laboratory.
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Business Impact Est. 1938
The fact that Samsung was able to identify and solve the issues with the Galaxy Note7 battery represents their commitment to their smartphone lines, which was just in time for the release of their S8 preorders. Samsung claims to have instituted a new and improve checks and controls on the phones to prevent any issues in light of what occurred with the Galaxy Note7’s (Pressman, 2017). The new and improved models of Samsung's Galaxy S8 and S8+ phones are exceeding sales from their failed predecessor models by "strong double-digit" percentages while also being at higher prices (Pressman, 2017). Preorders began on March 30, 2017. The new Galaxy S8 phone goes on sale to the public on April 21, 2017.
The Galaxy S8 is our testament to regaining your trust by redefining what’s possible in safety and marks a new milestone in Samsung’s smartphone legacy. - DJ KOH president of mobile communications business, Samsung Electronics
Image from IDC
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Reputational Impact Est. 1938
While the Media continues to give mixed reviews on whether they believe that Samsung Electronics can bounce back after the Galaxy Note7 crisis, it seems the public is willing to give the company a second chance. As stated, the company has already surpassed the presales of the Galaxy S7 and has received much anticipation from technology blogs. Although the sales might still be optimistic, it seems some customers are still concerned about the lack of detailed communication communication during the Galaxy Note7 debacle. Some of Samsung’s native country (South Korea) customers, whom are devoted to the Samsung brand, have expressed frustration with the company's communication communication throughout the crisis (Selyukh & Hu, 2016). While the communication team at Samsung U.S. was consistent with their news releases and up-to-date information about the recall, the president was vague when addressing the concerns of the public. It seems the company needed time and to demonstrate their devotion to their following, which they proved through corrective action. While sales might be soaring, it does not necessarily mean that company is 100% forgiven in the customer’s eyes. Due to customer concerns, while repairing its image after the Galaxy Note7 crisis, the company dropped 42 places in the U.S. Harris Poll as discussed in “Company Reputation” Reputation” portion of the case study for ratings in 2017 (Rahim, 2017). The company still maintains a large portion of the market share, but was beaten by Apple for the U.S. market in 2017. The hesitation to recall the phone in all markets globally might have had an impact in the ratings, even though the U.S. was one of the first of Samsung branches to be recalled and offered replacements.
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Reputational Impact Est. 1938
The critical issues for the company will be to overcome the lack of communicati communication on the publics feel that they aren’t receiving being the most important on a global scale. The quality of products is still an issue, but with less intense pressures as they company has attempted to prove itself with finding the exact solution of the Galaxy Note7 errors by research and testing. The overall image issue also comes into consideration, but time and proven assurance will help ease people’s concerns about the Samsung brand. With the release of the Galaxy S8 and preorders being high, the company still has a chance for redemption in both the media and the public’s minds, even with what some felt as a lack of communication from the company. Overall, the company still has leaps and bounds to prove its commitment to the Samsung smartphone industry and their customers in all aspects of business, not just the products.
Image from The Verge
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Reputational Impact Est. 1938
Throughout the entirety of the crisis, as it stretched for multiple months in the company’s attempts to get back 100% of the defective Galaxy Note7’s, Note7’s, the company was successful in crisis control. As people were panicked, their social media efforts went to console those customers, but the lackluster recall options were offensive to some fans. With mixed reviews on the methods they used to handle the crisis, it is evident that decisions made were of sound. This is proven by the success of the S8 release and showing. Although fans and the company’s following might not be completely over the Galaxy Note7 incident, the company was able to get back on track. The company did try to communicate with their publics as openly and candid as possible for a large corporation. In fact, in efforts to reach the 4% of the Galaxy Note7 public that has yet to return their phones or those who are curious about the recall, the Samsung website still has a link on their main page about the recall and what it entails. The company has also left all of their newsroom releases open to the public viewing as well. This creates transparency within the company’s brand and should not be a concern for the company’s following. The company was also extremely successful in their corrective action efforts, this in part was due to their reliance to the customers. Recalling an entire smartphone extension collection was a responsible and demonstrative component of what type of values Samsung stand behind. The recall and exchange program was constantly being instructed, and at times enforced by the corporation to ensure that their customers were able to be safe and trust their products. What became clear about the way this crisis was handled, however, is that a consistent and constant voice must be portrayed not only across all regional or national social media channels, newsrooms or official company statements but also on a global scale. Controlling the narrative is an important and influential aspect of a crisis, not just around the incident but on a global scale as well. Samsung missed the mark on creating a unified voice in its recall methods as well as informing the public. The Samsung U.S. news releases and twitter updates satisfied concern U.S. residents but left the Samsung corporate floundering for widespread communication communicati on efforts that created a voice that matched the U.S. consistency. While the Samsung corporate president was in contact with the media, many felt that their concerns were not being heard globally. The China market reflected this overlook by selecting competing competing brands during the crisis. South Koreans went to the media to express concerns A P R I L
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