Samsung’s Note 7 literally on fire!

Perfect example for Crisis management in public relations.

Abstract

After the release of Samsung’s Galaxy Note 7 in the States and South Korea it was recalled within few weeks later. This paper will examine a literature sited within the theory of Crisis Management by Crandall, W. R., Parnell, J. A., & Spillan, J. E. (2013). Then it will be conducting the methods taken as the 3rd and the 4rth stage of crisis in the internal and external landscapes connecting it to what Samsung has done to overcome their disaster as a case study. In conclusion, this paper will be showing how Samsung followed these methodologies successfully and how they gained the Media and the public’s trust again. 

Introduction

As I was traveling a lot back in the end of 2016 and the beginning of 2017, I recognized a new announcement by the flight attendees. The normal statements were firstly the safety precautions travelers should take into consideration in case of a flight crisis, and secondly that this specific flight and all flights were smoking free cabins. The third back in these 2 years was that if someone had the Galaxy Note 7 to report immediately to the hostesses. Other than that, I remember on the check-in counters in the airports a new deadly equipment was added to the posters of the prohibited lists of belongings and again it was the mobile Galaxy Note 7. Nevertheless, most of the mobile technology fans won’t forget how Apple’s IPhone 7 and Huawei invaded the top 10 lists of mobiles at that time. This all happened because of Samsung’s Galaxy Note 7 catching fire and burning what is around it. This is what a major crisis is for a company like Samsung, this is a turning point for such a huge organization. So, what did Samsung do to get over the impact of the crisis they faced when their new mobile release product caught fire?

Literature Review

“A crisis is the perfection of an unpredictable event that threatens important expectancies of stakeholders and can seriously impact an organization’s performance and generate negative outcomes” (T. Coombs.2007). According to the book of Crandall, W. R., Parnell, J. A., & Spillan, J. E published in 2013, Crisis management: Leading in the new strategy landscape, there are four stages of crisis. The Pre-conditions, the Trigger-event, the Crisis and the Post-crisis. The preconditions, which is the pre-crises stage, are small events that pile up before the crisis occurs. Responsibility cannot be endorsed only to those involved within that step. The stage when the crisis escalates and causes an imbalance in a certain organization is the stage of the trigger-event. After the trigger event a crisis might occur and will source a disaster and it is when the crisis reaches its peak and causes a huge damage to the organization and its stakeholders. The post crisis step is when the crisis is over, the management should reflect, evaluate and learn lessons in order to prevent future crisis events. To extent this theory another description for the stages was given by the book to the readers and it was the framework of crisis management in the internal and external landscape of the organizations. The first is the landscape survey, where internally is the crisis threats that exist inside the organization, and externally when the crisis threats exist outside the organization. The second stage is when the company should do a strategic planning for their organization so they plan solutions for potential crisis events, whereas externally they do plans outside that help in the preparation of the possible crisis event way outs. If a crisis hits the organization, they should manage their internal and external stakeholders in order to overcome this event. Lastly, they should follow an organizational learning strategy of what they’ve learned from the crisis internally and what learnings that is taking place outside in relation to the type of crisis the organization just experienced. In favor to the case study that will be analyzed below, the 3rd and the 4rth stage of the framework will be studied in details. The Crisis Management stage is the third stage in a crisis management framework. It is simply focusing on addressing the crisis to resume the operations quickly. “This process involves managing the various primary and secondary stakeholders. Primary stakeholders typically include the owners, employees, customers, local communities, and suppliers” (Wheeler&Sillanpaa,1997).  In the internal landscape a crisis management team should be recruited on the spot to analyze what is happening and to communicate it internally with the shareholders. This team have many skills to be on top of, like monitoring, communicating, regulating, mitigating, and contaminating the damages. These skills are as important as managing the crisis by itself since when they try to narrow the problem down, new problems might spread out instantly. However, communicating the problem internally won’t be completed as a stage without communicating the problem externally, with the shareholders for example, with the media and with the publics. The biggest misunderstanding an organization can work upon is thinking that the media would discredit a company. The truth behind this is that media will only misinterpret when they are not given facts. Also, spokes persons should always be communicating with the stakeholder for them to know what is exactly happening. The publics are also a major audience for this crisis event specially the customers, since a specific organization wouldn’t be a successful one if there wasn’t a cash flow, and who would get the money to the organizations other than the consumers? A major come back after a crisis strikes the organization and after overcoming it, the organization can benefit a lot from what has learned and change it into a positive shock. “Although it is common to think of a crisis as a negative event, it can also be an opportunity for learning and change in the organization.” (Veil & Sellnow,2008).  This is when the 4rth stage of the crisis management framework, the organizational learning, takes place. Internally the company can have a single and a double loop learning, where it can pick up from what happened on the spot and for other potential crises.  The company should build a learning organization, and try to evaluate what they have been through. For example, a weekly meeting that summarizes the progress of the week. Since a crisis unfortunately had its record, therefore, there might have been a problem in a system somewhere in the departments, an organizational learning builds a new system in order to mitigate probable problems. The framework also spots on external landscape and its learnings. The organization have had its share in the media and it had been over the news, so if the crisis ended and it was pulled out successfully, the company here should communicate it to the media in order to update the public. A new stakeholders’ outlooks can also take place in such a stage. The company whether it was a small one or a big one should commit to a new beginning in a new management process. According to Veil&Sellnow (2008) legal issue externally should be taken into consideration and specially reevaluating the ethical codes in their company and their society. Nowadays, news is quickly spread around the world, especially in the age of the networked digital society. According to Russel,C. & Baer,D. (2009) in The four stages of highly effective crisis management: How to manage the media in the digital age book they stated that “Love it or hate it, Facebook, Twitter, YouTube, blogs, and more are increasingly common for effectively reaching both internal and external audiences.” Internet and especially social media can be the main trigger for the event, because it is uncontrollable and it can draw the news for the Media. Some journalists would check the newsfeed of their Facebook account to see what is happening around the world in order to choose their story of the day.  According to the key statistical indicators for the world’s internet, mobile, and social media users by Hootsuite (2018), the 55% of the total population is using internet, 42% among them are active social media users. Internet and digital communication plays a big role in drawing a certain path for an organization if it wasn’t controlled appropriately. As the readers can see here there is a way out for a crisis. A crisis can be strictly managed if the organization understood what they are going through. Later we will see how Samsung managed their crisis successfully, and it will proof that this theoretical framework works in solving problems.

Samsung’s Galaxy Note 7 literally on fire

 On August 19, 2016 Samsung had released its Galaxy Note 7 as a new mobile product.  The features were so attractive that made consumers buy it instantaneously.  It had an IP68 water resistance, a dual sided curve display, an iris recognition system, HDR color in the screen and HDR filter in the lens of the camera, along with many more appealing innovating structures. Two weeks after the release, videos and pictures were spread around the world of the phone catching fire. This is when Samsung did their first callback, to change the batteries from a new battery supplier and release it again. The main problem wasn’t only the battery so the phones caught fires again, and it is when they recalled the product a second time and stopped the production of this mobile. The problem with this mobile’s battery is that the negative electrode was deflected, meaning rather than being completely straight, it could end up bending in the top right corner of the mobile. Hence, the positive and the negative electrodes will react, it was the wrong design to the wrong battery.  Pio Shunker, the integrated marketing communication manager at Samsung mobile stated in the press conference in 2016 his shame to what this crisis has done to them; “We became a cultural meme, a daily announcement on every flight. There was a wave effect of negative commentary not just from the press, but from consumers as well”. Samsung lost a huge amount of money during this crisis. According to the Business Insider in October 2016, which is only 2 months after the disaster, 96% of Samsung’s mobile profits wiped out, 15% of sales dropped down, a loss of 3.85 trillion won (£276 million or $337 million) in sales and the recalling by itself costed 4.57 billion dollars. Unfortunately, they also lost 13.570% of their marker share. On the other hand, people hurried to by the IPhone 7, the prime competitor for Samsung. Samsung as a giant organization has to manage the crisis they went through. Internally, to pull out successfully, Samsung had a decisive and meaningful action. It got to the root of the cause, and it communicated the case effectively to the employees and the consumers. They hired 700 researchers and engineers to put over 200,000 phones and batteries under extreme conditions in order to test them. They trusted their partners to help out and they changed the battery suppliers. On the external landscape, communicating the case effectively to the public made them win over the battle. They first recalled the devices, and helped the injured parties with their losses. They acknowledged their problem and took the full responsibility.  They did many press conferences to promise the public that they would not rest until they know the root of the cause. They also uploaded a video of their spokesperson apologizing, with a very understanding voice tone promising the public higher expectations, and a close up with a blurry background to emphasize on what Tim Baxter the COO of the Company would say. Samsung opened to third party auditors and finally when they knew the main cause they addressed it to the public. Money was given to the injured parties along with a Samsung S7 in order to complete their regret. A very important way to reduce the damages is by controlling the social media. “They were instrumental; we could not have done this without our agency partners” (Shunker,2016). Samsung agencies set up a social media war room directly after the crisis and made sure to monitor media reports and consumer’s sentiments every day. If people search #GalaxyNote7 now, they wouldn’t find very negative comments as before back in 2016 and 2017. Above all this, their website doesn’t have GalaxyNote7 at all, but they have released a Note 7 fan product to show the community that they won the battle.  Agreeing with the website BrandUnderFire, Samsung had magnificently pulled out the situation, and they learned a lot as an organization and they have built an organizational learning evaluation system as a post crisis stage. As internal landscape in the organizational learning stage should take place immediately after the crisis, Samsung’s internal culture had a major change. The evaluation was committed as admitted, “It had to be proactive, had to take accountability for Samsung, it wasn’t the right thing to do, it was the only thing to do” (Shunker,2017). At the press conference of Samsung after the crisis had finished, they announced the 8 battery safety check points process to every phone they design before introducing it to the public. Lastly, it is easy to say that they have used the opportunity for a bigger brand purpose. Externally, the company had changed their battery suppliers. They also committed to a new brand love and new innovations. The biggest proof to their commitment is their Galaxy S8 phone and their virtual glasses campaigns. Galaxy S8 is now one of the most successful phones rated by the consumers. Galaxy S8 has a processor Speed, type MSM 8998 Octa Core 2.35Ghz (Quad Core), a + 1.9Ghz (Quad) display resolution and an internal memory. It was also tested in their 8 safety check points that included temperature stress tests, overcharging replications tests, x-ray and visual examinations tests, accelerated customer use circumstances tests, and voltage manufacturing review test. This is how they gained the media and the public’s trust again.

A respectful company like Samsung wouldn’t confess their pre-crisis stages. Though as looking to their history comparing it with Apple we find that most common triggering event might be the rush to compete with Apple’s IPhone 7.  “Samsung built its brand by being first to market with the coolest and newest technologies, from smartphones to televisions. The company released 6 smart watches in the year before Apple released the Apple Watch, and Samsung is regularly among the first to showcase slick new breeds of televisions like curved OLED displays” (Kovach,2016). So would Samsung let Apple release their series 7 mobile products without them releasing too?

Conclusion

BrandUnderFire analyzes 5 key questions to prove if a company had managed their crisis or not. Joining these to Samsung’s approach and connecting it to the theoretical framework mentioned above in the literature review we find Samsung on their top of their work. “Did you accept responsibility for your role in the crisis? Did you apologize? Did you make amends to the injured parties?  Did you articulate the ways your organization intends to avoid repeating the mistakes in the future?  Did you use what you learned from the experience to make the world a better place? That is, did your actions contribute to new safety protocols, new technology, improved standards, scientific discovery, or developments from which others can benefit?” (BrandUnderFire, 2018). Yes, Samsung has done all this and more. This is how we know Samsung’s approach in pulling out the situation was successful.A According to Samsung and Business Insider, the full recovery was on September 2017. It also went from 7th to 6th position in The Best Global Brand List.

Academic Advisor

Dr. Tao Papaioannou

University of Nicosia

References

Bai, J. (2017, Dec.18) Samsung Galaxy Note 7 Crisis. Stanford University. Retrieved from http://large.stanford.edu/courses/2017/ph240/bai2/

Best Global Brands 2017 Rankings. Interbrand. Retrieved from https://www.interbrand.com/best-brands/best-global-brands/2017/ranking/

Business Insider. (2016, Oct. 5). A Samsung Galaxy note 7 phone caught fire. YouTube. Retrieved from https://youtu.be/K19LKUUx4YU

Crandall, W. R., Parnell, J. A., & Spillan, J. E. (2013). Crisis management: Leading in the new strategy landscape. Sage Publications.

Dua, T. (2017, Oct. 6). From a ‘cultural mem’ to a comeback kid: How Samsung overcame it Galaxy Note 7 fiasco. Business insider. Retrieved from https://www.businessinsider.com/how-samsung-overcame-its-galaxy-note-7-fiasco-2017-10

Edwards, J. (2016, Oct.27). The first hard numbers on the Note 7 fiasco show 96% of Samsung’s mobile profits wiped out. Business Insider. Retrieved from https://www.businessinsider.com/sales-revenue-exploding-galaxy-note-7-cost-samsung-2016-10

Jordan, J. (2016). The four stages of highly effective crisis management: How to manage the media in the digital age. CRC press.

Kovach, S. (2016, Nov.5). Samsung’s culture needs to change if it wants to survive. Business Insider. Retrieved from https://www.businessinsider.com/samsung-reaction-to-note-7-recall-2016-11

Markov, B. (2017, Mar.30). Do What You Can’t Samsung best Commercial. YouTube. Retrieved from https://www.youtube.com/watch?v=L3N1jeBp7H8&feature=youtu.be

Paterson, A. Samsung recalls Galaxy Note 7 after Battery explosions and fires. The Washington Post. Retrieved from https://www.washingtonpost.com/news/the-switch/wp/2016/09/02/samsung-recalls-galaxy-note-7s-after-battery-explosions-andfires/?utm_term=.9de61acc531e

Techaeris. (2016, Sep.16). Samsung COO Tim Baxter Note 7 Apology. YouTube. Retrieved from https://youtu.be/k8P3_2kMums

(2017, Jan.23). Arirang News. Samsung Electronics says battery defect was cause of Galaxy Note 7 fires. YouTube. Retrieved from https://youtu.be/WaArRksLX88 (2018, Feb.8).  How Samsung’s Brand is Recovering after the Galaxy Note 7 Crisis. BrandUnderFire. Retrieved from https://brandunderfire.com/howsamsungs-brand-is-recovering-after-the-galaxy-note-7-crisis/

Leave a Reply

Fill in your details below or click an icon to log in:

WordPress.com Logo

You are commenting using your WordPress.com account. Log Out /  Change )

Google photo

You are commenting using your Google account. Log Out /  Change )

Twitter picture

You are commenting using your Twitter account. Log Out /  Change )

Facebook photo

You are commenting using your Facebook account. Log Out /  Change )

Connecting to %s