Samsung Galaxy Note 7 crisis and brand image restoration strategy

Restoring Brand Image at Samsung

Samsung is currently facing a brand image crisis following numerous incidents of explosion of its most recently released smartphone, Samsung Galaxy Note 7. A well-crafted brand image restoration strategy is required if the company is to thrive in the stiffly competitive environment in which it operates. Without the strategy, there is the possibility of customers losing confidence in other products of the company. This report discusses how Samsung can restore its brand image in the wake of the crisis. The report is divided into three parts. Part 1 discusses the Samsung brand, its history, management, strategy, as well as the advantages and strengths the brand has over competitors. Part 2 focuses on the crisis and its impact. Part 3 explores the communication strategies that may be used to restore the brand image.

Company Background, Strengths, and Strategy

Samsung is a multinational conglomerate firm incorporated in South Korea. Through its subsidiaries, the conglomerate is involved in the designing, development, manufacturing, and marketing of a broad variety of products, including consumer electronics, household appliances, and textiles. The brand\'s product portfolio also entails textiles, food processing, retail services, insurance services, ship building, chemicals, medical services, as well as construction and engineering (Michell, 2011). The highly diversified nature of the organization\'s product portfolio is one of the major strengths of the company compared to most multinationals. This means immense power and financial strength in the global marketplace.

The history of Samsung dates back to 1938, when it was incorporated as a trading company, mainly dealing with dried fish, groceries, and noodles (Michell, 2011). The company quickly diversified into other areas, and has over the years become an ideal epitome of a global conglomerate. Today, Samsung is the largest business conglomerate in South Korea, and one of the largest firms worldwide with respect to revenue and assets. The organization has operations in over 100 countries across the globe. The extensive brand presence enjoyed by the company is another major strength. It is not hard to notice the brand everywhere one goes around the world. This has given the company a significant competitive edge over its major rivals such as Apple, Lenovo, IBM, Hewlett Packard (HP), and Huawei. Other important strengths of Samsung include strong research and development (R&D) capabilities, proven innovation excellence, robust marketing, a strong distribution strategy, as well as strong leadership and management. The conglomerate is currently headed by Lee Kun-Lee, who serves as the Chairman of Samsung Electronics. Lee heads a powerful management team with extensive corporate experience. This adds to the strengths of the company.

An even more important strength for Samsung is its dominance in the global smartphone market. The company is the largest producer of smartphones in the world as of 2016, with an approximately 23% market share (International Data Corporation [IDC], 2016). Its smartphone products feature innovative designs, excellent functionality, as well as unmatched usability; all which reflect the company\'s commitment to product innovation. The Galaxy Note series of smartphones has particularly posed a major threat to rival smartphone brands, including Apple. As per the BCG matrix, Samsung can be described as a cash cow. This is evidenced by the brand\'s huge market share, mammoth revenues, profitability, and extensive R&D investment. In spite of this, deficiencies in the latest version of the Galaxy Note threaten the company\'s dominance in the global marketplace.

A key ingredient attributable to success of the company is its strategy. Compared to most of its rivals, Samsung relies on economies of scale. The company targets a larger global customer base unlike Apple, which predominantly targets the high-end market. By taking advantage of economies of scale, the company is able to deliver products at a more competitive price. Compared to the iPhone, the Galaxy Note retails at a lower price. Samsung\'s competitive pricing has particularly been instrumental to the company\'s rise to dominance in the global market. Indeed, Samsung is the number one smartphone brand in most low to middle-income countries, particularly in Africa, Asia, and Latin America. The Apple brand remains less popular in these regions due to its premium pricing model.

Samsung\'s cost advantage further comes from its vertically integrated supply chain. Unlike Apple and other major rivals, which rely on contract manufacturers, Samsung produces majority of the components used in its smartphones, including chips, display screens, cameras, sensors, and batteries (Nixen, 2013). In addition, Samsung is a great learner. The company\'s response to markets is unparalleled (Nixen, 2013). A few years ago, Nokia was the dominant mobile phone maker. Nonetheless, Samsung realized that consumers wanted more appealing, yet affordable phones. Within a few years, Nokia was no more, with much of its market share having been grabbed by Samsung. Furthermore, Samsung realized that consumers wanted smartphones with larger screens. It quickly responded to this need, causing other smartphone manufacturers to follow suit.

Part 2: The Crisis

The brand image crisis that Samsung is currently experiencing centers on the recently released Galaxy Note 7. The smartphone was officially introduced on the 19th of August, 2016 to succeed Galaxy Note 5 and compete with Apple\'s iPhone 7. Some of the key features of the device include slimness, water resistance, double-sided curved display, iris recognition, as well as unmatched photo and video taking capabilities. Two days upon release, demand was unprecedented, surpassing pre-order levels in the domestic market and causing delays in international markets, owing to shortages in supply. However, in less than two weeks after release, fires and explosions in the smartphone were reported. It was discovered that the device\'s battery had a defect that resulted in excessive generation of heat during charging. As a result, the company announced a suspension of sales of the device as well as voluntary recall on the 2nd of September, 2016. In the U.S., a formal government recall was declared on the 15th of September, with the Consumer Product Safety Commission advising users to stop using the device entirely.

Initially, Samsung replaced the affected devices with a new one or a Galaxy S7, though with batteries from a different supplier. In addition, the company announced that it would provide a software patch to curb charging to 60%, and thereby reduce the likelihood of a fire or explosion. Nonetheless, incidents of fire and explosion even in the replaced devices were reported in the beginning of October (Lee, 2016). Sales of the device were once again suspended on October 10, 2016. Also, the company announced a worldwide recall of all devices. The following day, however, the company chose to permanently discontinue and stop the production of Galaxy Note 7. The decision was followed by formal recalls of the device throughout the world. Though Samsung alluded to a cell issue in the battery, the precise cause of the defect is yet to be publicly known.

The crisis has had a major impact on Samsung. Estimates indicate that the recall cost the company in excess of $17 billion in terms of recall expenses as well as revenue and market value loss (Lee, Kim & Kim, 2016). Indeed, the company issued a statement warning that operating profit in the third quarter of 2016 would decline by 33%. The crisis has also affected the company\'s relationships with some stakeholders, particularly carriers, retailers, regulators, and airlines. Between 9 and 10 October 2016, major U.S. carriers, notably AT&T, Verizon Wireless, T-Mobile, U.S. Cellular, and Sprint Corporation, announced their decision to defer sales of the device until further notice (Lee, 2016). Parcel delivery companies such as the British Royal Mail stated they would decline parcels with the device, while internet marketplaces such as eBay announced delisting of the device from their platform. Further, the Federation Aviation Authority (FAA) and its counterpart in the European Union (the European Aviation Safety Agency) warned against switching on or charging the devices while aboard an aircraft. With mounting pressure and increased incidents of fire and explosion, the FAA prohibited carrying of the device aboard any aircraft, even if switched off. Airlines around the world also banned passengers from carrying Galaxy Note 7 to the aircraft (Lee, 2016).

It is also worth considering the impact of crisis on personnel. The crisis may affect the yearly performance review. It is likely that some employees within the company will bear responsibility for the disaster. Some executives or managers may fail to get a promotion, or face a dismissal. There could also be a significant restructuring in reaction to the crisis. This would certainly affect personnel. These possibilities mean that there could be a great deal of anxiety amongst personnel at the company.

Overall, the future does not look bright for Samsung. The crisis has significantly hurt the reputation of the company. The destroyed brand image could mean the end of Samsung\'s dominance in the global smartphone market. Major competitors, notably Apple and Android vendors, will take advantage of this misfortune to grab Samsung\'s market share. In the future, carriers and other retailers may be reluctant to stock Samsung smartphones. This would significantly hurt the sales of the company as carriers and retailers constitute some of the major channels through which the company distributes its smartphones. More regrettably, the negative brand image may affect other products manufactured by the company such as televisions, computers, and refrigerators. Consumers may start viewing these products negatively, further affecting sales. More fundamentally, in an attempt to retain customers, Samsung may adjust its pricing strategies. The company may elect to sacrifice profit for some time so as to keep customers. It will also take a great deal of public relations for the company to convince customers to buy its smartphones again.

Why understanding customers is the most important aspect in marketing

There are several aspects that are important in marketing. Nonetheless, understanding who to satisfy is arguably the most important thing. Organizations must have a comprehensive understanding of their target market if they are to know the value needed by their target audience and how to best deliver it. Understanding customers entails gaining knowledge of their needs, expectations, concerns, and behaviors. Indeed, this is the first step of developing the marketing plan or strategy. When an organization understands its target audience, it can more effectively develop products that meet their needs in terms of product attributes, pricing, promotion, and distribution. For instance, with knowledge that the target market is high-end, the organization would develop products with unique and appealing attributes. The organization would also know the most appropriate pricing and promotional strategy to use. A high-end market would require premium pricing, for instance. The market may also require contemporary promotional techniques such as online marketing.

Understanding who to satisfy is important for building strong relationships with customers, particularly with regard to attracting and retaining customers and creating customer loyalty. These are fundamental aspects for any business organization, regardless of size or industry of operation. Organizations invest a great deal of time, effort, and resources to lure customers to their brand and make it their most preferred choice. Building such relationships may not happen without an understanding of the customer. The organization must first understand the customer\'s perceptions, attitude, feelings, and thoughts about the brand. Knowledge of these aspects places the organization in a better positive to drive customer satisfaction and overall performance as well as gain competitive advantage in an intensely competitive business environment. In essence, marketing starts with knowing the customer. Without this knowledge, an organization may not effectively understand what value the target audience requires and how best to deliver the value in accordance with overall corporate objectives.

Technology and Marketing

Defining what exactly technology is can be quite difficult. Indeed, technology can mean different things to different people, or in different contexts. All the same, technology generally denotes the skills, techniques, processes, and methods utilized in the creation of goods and services, or the attainment of a certain objective such as research. Technology could mean machines, devices, facilities, factories, computers, or computer networks. It is actually a broad phenomenon. Within the context of marketing, however, technology is often viewed from a communication perspective. This is particularly because marketing is primarily about communicating with the consumer. Communication technology in this regard refers mainly to computing devices and computer networks, whose growth has been unprecedented in the last two decades or so. This has substantially changed how organizations conduct their marketing activities. The emergence of the internet, social media, as well as portable devices such as smartphones and tablets has made marketing easier and more interactive. Unlike with conventional channels such as television and the print media, marketers can now interact with a significantly larger audience in a two-way manner. Consumers are now not only receivers, but also producers of information. In social media, for instance, consumers can like, share, and retweet marketing messages. More fundamentally, consumers can now receive marketing messages and interact with marketers while on the go -- at home, in the bus, in the office, at the hotel; virtually everywhere. In fact, online and mobile marketing have become the most significant trends in the marketing arena in the last few years. This clearly shows how technology makes marketing easier. While traditional marketing channels such as the print media are likely to be in existence a little bit longer, they are increasingly becoming obsolete. Consumers in the future will want to be engaged via digital platforms. The sooner marketers fully embrace modern technology the better.

Why it is necessary for MBA students to have knowledge of cost and managerial accounting

The field of business administration is essentially concerned with the management of a business. It is the art of strategizing and organizing a group of people with the aim of achieving a defined goal or objective. One of the important areas of business administration is accounting. Financial accounting information supports managers in decision-making, underscoring the need for MBA students to have knowledge of financial accounting. An important branch of accounting is cost accounting, which is basically concerned with controlling costs. Managers need cost information to control present business operations, ensure cost efficiency, as well as plan for the future. They must allocate scarce resources to competing needs or options. Indeed, the most crucial priority for any business is to achieve the most with the least. Businesses strive to maximize profitability with the least cost possible. Therefore, equipping MBA students with cost accounting knowledge is vital for preparing managers for the daunting challenge of ensuring cost efficiency. MBA students also require knowledge of managerial accounting, which is mainly concerned with strategic management, performance management, and risk management. In a competitive environment, a business organization must make the right strategic decisions in consideration of the associated risks and returns. The organization must consider various investment options to determine the one with the greatest return. In addition, they must determine which product lines, customer segments, business divisions, markets, plants, processes, or activities are profitable or efficiency, and those which are not. Managers require management accounting knowledge to make such decisions. In essence, knowledge of managerial accounting is essential for enabling managers to enhance organizational efficiency. On the whole, MBA students require cost and managerial accounting knowledge if they are to be effective managers.