Samsung Will Weather the Note7 Storm
In the past few weeks we’ve witnessed the launch, recall, replacement, second recall and subsequent demise of Samsung’s critically acclaimed Galaxy Note7 smartphone. Based on some of the highly emotive media reports it would be easy to draw inaccurate conclusions.
Samsung’s mobile phone business has certainly suffered reputational damage, and so far we can’t fully assess the level of contagion into other areas, but the company will recover from this episode and the Galaxy S7 and S7 edge devices continue to sell well.
Ironically for Samsung, had its first recall and replacement programme been successful the incident would likely have become a case study in crisis management for consumer electronics. Unfortunately, Samsung’s inability to accurately diagnose the problem combined with its desire to get replacement devices into the hands of eager Note7 customers came with a heavy price.
As a result, Samsung has to pick up the pieces and focus all its efforts on winning back its customers’ trust. Don’t be surprised to see it making its biggest marketing investment in history to get back on track. With $70 billion in cash reserves, Samsung is in the fortunate position that it can weather the $5.3 billion costs associated with the Note7 problems. For many other phone makers this would have been a potentially disastrous hit.
Now is the time to be level-headed. Samsung must resist the temptation to accelerate the release of future products. It can’t afford to take any risks with its next flagship launch. The Note7 must remain an isolated incident that’s never repeated.
As for rival phone makers, many will feel like they have “dodged a bullet” as the Note7 provides a harsh lesson of what can happen when pushing technology to its limits.
All manufacturers should take note of Samsung’s difficulties, ensuring they have the necessary crisis management provisions in place and also reviewing their own testing and safety procedures.
For more detailed analysis see CCS Insight Hotline: Samsung Will Recover from Note7 Woes.
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