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WhattoDoinACrisis:
AnAnalysisofSamsungGalaxyNote7CrisisCommunication
2017ArthurW.PageSocietyCaseStudyCompetition
XiaohanXu
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TableofContents
Abstract.................................................................................................................................3
CompanyBackground.............................................................................................................3HistoryofSamsung..........................................................................................................................3ValuesandPhilosophy.....................................................................................................................3
TheCrisis................................................................................................................................3
SocialMediaPerformance......................................................................................................7Twitter.............................................................................................................................................7Facebook..........................................................................................................................................8
CaseUpdate...........................................................................................................................9
Conclusion..............................................................................................................................9
AppendixA-CommitmenttoSafety.......................................................................................10
AppendixB-CommentsonTwitter.........................................................................................11
AppendixC-CommentsonFacebook.....................................................................................12
ReferenceList........................................................................................................................13
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AbstractThereisnothingcomplicatedaboutthegoalsofcrisismanagement:terminatethecrisisquickly,limitthedamage,andrestorecredibility.Thecardinalruleforcommunicationduringacrisisistotellitallandtellitfast(Seitel,2007).Unfortunately,Samsung’ssummer2016responsetoitsnewsmartphone,GalaxyNote7,explosioncrisiswasneitherfastnortrustworthy.Butonlytimewilltellifthecompanycanregainitsreputationamongitscustomers.
CompanyBackgroundHistoryofSamsungAlthoughSamsungtodayisknown(particularlyintheUS)asaleadingelectronicscompany,itstartedasasmalltradingcompany,sellinggroceryproductstothesurroundingarea(Samsung’sHistory,n.d.).Thecompanyenteredtheelectronicsindustryinthe1960swithavarietyofproductfocus(Burris,2016).
TheopportunityforSamsungtocompeteintheglobalbusinessworldistheemerginghomeelectronicsindustry,anditsincreasingandcontinuedfocusontechnology.Samsungsoonbegantoexportproductsandexpandedgloballyinthe1980s.Thenit“grewasaninternationalcorporationthroughoutthe1990s”(Samsung’sHistory,n.d.).Thankstoitstechnology-focusedstrategy,Samsungsurvivedinseveralfinancialcrisesandgrewintoanindustryleader.
ValuesandPhilosophyCorevaluesofacompanyaretheDNAofsuccess.OnSamsung’swebsite,itissaidthatthefivecorevaluesofSamsungare:people,excellence,change,integrityandco-prosperity.“AtSamsung,wefollowasimplebusinessphilosophy:todevoteourtalentandtechnologytocreatingsuperiorproductsandservicesthatcontributetoabetterglobalsociety”(ValuesandPhilosophy,n.d.).
Samsung’scommitmenttotheseprincipleswouldbeputtothetestfollowingaproductmalfunctioncreatingasubstantialcrisis.
TheCrisisOnAugust2nd,2016,SamsunglaunchedthenewGalaxyNote7phone.Inanofficialpressrelease,Samsungsaidthat“theGalaxyNote7providesheightenedsecurityandprivacy,withhighlyadvancedbiometricauthentication,includingfingerprintscannerandirisscanningtechnology”(SamsungUnveilstheNewGalaxyNote7,2016).
MediacompaniesalsopraisedtheSamsungproduct.TechnologymagazineWiredsaidonitswebsitethat“ThisisthefirstNotephonetouseUSB-Ccharging,andthefirstGalaxydevicewithHDR10videoplayback.Butthemarqueefeaturemightbetheiris-scanningcamera.Youcanunlockthephonesimplybylookingatit,andsecurefolderswithretinaorfingerprint
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protection”(Moynihan,2016).DigitalmediawebsiteMashable'sSeniorTechCorrespondentsaidinanarticlethat“Samsung'sGalaxyNote7isthebestsmartphoneontheplanet”becauseitis“stunningfromeveryangle”(Wong,2016).Thisarticlegot8.5ksharesintotal.
However,evenwith“advancedsecurity”(SamsungUnveilstheNewGalaxyNote7,2016),thissmartphoneendedupbeingwithdrawnfromtheglobalmarketbecauseofseriousexplosionproblems.
ThefirstreportofexplosioncameoutonAugust24,2016inSouthKorea,only5daysafterthesalesbeganonAugust19in10globalmarkets.TechniciansfromSamsungsaidtheexplosionwascausedbyconsumersusinganunofficialcharger,andremindeduserstokeepthesmartphoneawayfromtheirbodywhilecharging.OnAugust31,asecondexplosioninSouthKoreawasreported,whichledtodelayedshipmentofthesmartphoneinSouthKorea(Here'stheTimeline,2016).“ShipmentsoftheGalaxyNote7arebeingdelayedduetoadditionaltestsbeingconductedforproductquality,SamsungsaidinastatementtoReuters.Thefirmdidnotelaborateonwhatitwastestingandtowhatmarketsshipmentswerebeingdelayed”(Lee,2016).
AndthenonSeptember2nd,SamsungElectronicsannouncedthatitwould“replaceallGalaxyNote7smartphonesequippedwithfire-pronebatteriesandhaltsalesoftheflagshipproductin10markets”(Lee,2016).Thisrecallprogram,however,excludedChina,whereitwassaidwithnobatteryproblems.
Buttheexplosionsdidnotstop.ThroughoutSeptemberexplosionreportscamefromdifferentcountries:Australia,America,Singapore…AndevenChina,themarketthatwasconvincedwithnobatteryproblem,alsoreportedseveralexplosions.OnSeptember19,SamsungsaidonitsChinawebsitethatoneoftheexplosionsreportedwascausedby“externalheating”(SamsungElectronicsChinaStatementonSeptember19,2016),“seekingtoassurecustomersthedevicesbeingsoldtherearesafe”(Lee&Carsten,2016).Justafterthestatementwasreleased,twootherexplosioncaseswerereportedinChina.
TheU.S.ConsumerProductSafetyCommissionsaidonSeptember9that“ownersofSamsungGalaxyNote7smartphonesshouldstopusingthedevicesandturnthemoffbecauseofthethreatofabatteryfire”(Beech,2016).“Lithium-ionbatteriespackalotofpowerintoasmallpackage.Whenthesebatteriesover-heatandburst,theresultscanbeserious.ThisiswhytheU.SConsumerProductSafetyCommission(CPSC)isurgingallconsumerswhoownaSamsungGalaxyNote7topowerthemdownandstopchargingorusingthedevice”(PressStatement,2016).OnSeptember10,SamsungElectronicsCoLtdsaidit“recommendedSouthKoreancustomersstopusingtheGalaxyNote7phones,whichthecompanyrecalledduetofaultybatteriespronetocatchingfire”(SamsungElecasks,2016).Twodayslater,onSeptember12,
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“SamsungElectronicsCoLtd.'s(005930:KS)sharesfelltotheirlowestlevelinnearlytwomonths”(Lee,2016).
(Picture:005930:KS,n.d.)
Moreover,GalaxyNote7wasrestrictedduringflightsinsomecountries.TheU.S.FederalAviationAdministrationsaidonSeptember15thatairtravelers“mustkeepSamsungGalaxyNote7phonesoffandunpluggedduringflight,strengtheningitspreviousadvisoryafterU.S.ConsumerProductSafetyCommissionissueditsofficialrecallonthatday”(BRIEF-Samsungphonesmustbeoff,2016).
SamsungtriedtoresumeitssalesbylaunchingnewGalaxyNote7replacementdevices.“Over500,000newGalaxyNote7replacementdevicesarrivedinU.S.andhavebeenshippedtocarrierandretailstores”(Brief-SamsungElectronicssays,2016)onSeptember20.Atthesametime,SamsungElectronicsCanada“providedanupdateonGalaxyNote7software”(Brief-SamsungElectronicsCanada,2016)startingSeptember21.
However,theseactionswerefarfromsolvingtheproblem.Samsung’sunevenhandlingofGalaxyNote7firewascriticizedbyCCTV,theChinesestatebroadcaster,onSeptember29,sayingthat“avideoapologySamsungissuedtoU.S.consumers,alongwithvarious
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replacementoptionsandcompensation,wasinstarkcontrasttoitstreatmentofthoseinChina,wherethecompanyissuedabriefstatementsayingmostphonesdidn'tneedtobereplaced”(Jiang,2016).
AccordingtoaNewYorkTimesarticle,this“unevenhandlingofGalaxyNote7fireangeredChinesepeople”(Wee,2016).InChina,SamsunghasbeenamongthetopsmartphonebrandsforalongtimeanditsmaincompetitorsincludeAppleandHuawei.TomanyChinesecustomers,SamsungusedtobeareasonablechoicebecauseithadhigherqualitythanHuaweiandlowerpricecomparedtotheAppleproduct.Thecrisis,however,puttheirchoicesintoquestion.
TheSouthKoreancompanyhadtoexplainlaterthat“ToSamsung,Chinaisoneofthemostimportantmarketsandacrucialdestinationforforeigninvestment,”and“Samsungneverholdsadoublestandardagainstthem”(Wee,2016;SamsungElectronicsChinaStatementonSeptember29,2016).Finally,SamsungdecidedtorecalltheproductinChinaonOctober11.
ButtoU.S.consumers,replacementdevicescausednewproblems.OneofthereplacementSamsungGalaxyNote7PhoneswasreportedtocatchfireonaSouthwestplaneonOctober5.Shortlyafterthat,Samsungsaid“thereisnoevidencethatthisincidentisrelatedtothenewnote7”(Brief-Samsungsays,2016),butU.S.FederalAviationAdministrationconfirmedlaterthat“itwasaSamsungphonethatcausedthesmoke”(Brief-U.S.FAAsays,2016).
Asaresult,telecommunicationcompanieslikeAT&TandT-Mobiledecidedtostopexchangingthedevices.InternationalBusinessTimescitedportionsofAT&T’sofficialstatements:‘“Basedonrecentreports,we'renolongerexchangingnewNote7satthistime,pendingfurtherinvestigationofthesereportedincidents,”anAT&TspokesmansaidinanemailedstatementtoReuters’(Kreiter,2016).T-Mobile’sCEOJohnLegeretweetedthat‘theyarerecallingthereplacementphones“outofanabundanceofcaution”’(Samsungtemporarilyhaltsproduction,2016;Update,2016).
Finally,onOctober11,SamsungElectronicsCoLtddecidedtohalttheproductionofitsGalaxyNote7smartphones.BusinessInsiderreported,‘"Forthebenefitofconsumers'safety,westoppedsalesandexchangesoftheGalaxyNote7andhaveconsequentlydecidedtostopproduction,”thecompanysaid’(Cook,2016).Samsungreleasedastatementwhichsaid,“Becauseconsumers’safetyremainsourtoppriority,SamsungwillaskallcarrierandretailpartnersgloballytostopsalesandexchangesoftheGalaxyNote7whiletheinvestigationistakingplace”(SamsungWillAsk,2016).Again,SamsungElectronicsCoLtd.'s(005930.KS)sharesfellsharplythenextday(005930:KS,n.d.).
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(Picture:005930:KS,n.d.)
SocialMediaPerformanceSamsunghasagreatnumberofofficialpagesonFacebookandTwitter.ForAmericanmobileusers,specifically,thereare@SamsungMobileUSAonFacebook,and@SamsungMobileUSonTwitter.
TwitterWhenGalaxyNote7firstcameoutonAugust2,@SamsungMobileUStweeted26messagestointroducethisproduct,replytoinquiries,andencouragepre-order.ItkepttweetingoneortwomessageseverydayuntilAugust19whenitannouncedthat“Thewaitisover.Sayhellotothe#GalaxyNote7.”Therewere11tweetsonthatsingleday.ThefirsttweetaboutthecrisiscameoutonSeptember5,whichistoencourageconsumersto“participateintheU.S.#GalaxyNote7exchangeprogram”withalinktoanofficialwebpagetitled“GalaxyNote7SafetyRecall”(YourSafetyis#1,2016;SamsungExpandsRecall,2016).
OnSeptember10,@SamsungMobileUSaskedcustomersto“powerdownyourNote7&returntowherepurchased.”FromSeptember5toOctober14,therewere5tweetsabouttherecallprogramandallofthemcitedtheofficialstatementsbySamsungonitswebsite.Underalltweets,someoneatSamsungrepliedtothecommentsthatcustomersmade,whichwas
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valuableforSamsungbecauseitcouldnotonlyshowthatitcaresalotaboutcustomers’opinions,butalsogetthefeedbackassoonaspossibleandhaveacontrolofwhat’sgoingon.
NotuntilNovember10did@SamsungMobileUStweetthat“We’reinvestigatingeveryaspectofourmanufacturing,engineeringandqualitycontrolprocesses,”withanapologyandcommitmentmadebyGregoryLee,PresidentandCEOofSamsungElectronicsNorthAmerica:
“AtSamsung,weinnovatetodeliverbreakthroughtechnologiesthatenrichpeople'slives.Animportanttenetofourmissionistoofferbest-in-classsafetyandquality.Recently,wefellshortonthispromise.Samsungwillre-visiteverystepofourengineering,manufacturing,andqualitycontrolprocessessowecanmeetthehigheststandardsforexcellencemovingforward.Onbehalfofour17,000employeesacrossthecountry,wearegratefulforyourongoingsupportandagain,wearetrulysorry”(We’reinvestigating,2016;Toourvaluedcustomers,2016)(fulltextinAppendixA).
Underthisapology,Samsungreceivednegativecommentsonitsprocrastinationandinefficiency,aswellasmanysupportiveremarks(showninAppendixB).
FacebookPostsontheFacebookpage@SamsungMobileUSAwerelessfrequentthantweets.FromAugust2toAugust9,therewere5postsaboutGalaxyNote7.ThenonSeptember5,itposted
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thesamemessageasTwittertoencouragetheexchangeprogram.FromSeptember9toOctober14,therewereonly4postsabouttherecall,andonNovember10,itpostedGregoryLee’sapology.SameasTwitter,therewassomeonerespondingtothecommentsthatyesterdaymade.Samsung’sconsistentresponseconveyedthemessagethatitwasworkinghardtosolvetheproblemanditcaresaboutthecustomers.
ThetoptwomostcommentedandsharedpostswereonSeptember15,whichexplainedeverydetailoftherecallandexchangeprogram(15,000Commentsand28,000Shares),andtheapologyonNovember10(15,000Commentsand16,000Shares).UnderthepostofGregoryLee’sapology,inadditiontoinquiriesandcomplaintsabouttheproduct,manypeopleexpressedtheirloyaltytoSamsungbrand(showninAppendixC).
CaseUpdateSamsungUSissuedastatementonDecember9onitswebsite,sayingthat“SamsunghasannouncedanexpandedvoluntaryrecallonalloriginalandreplacementGalaxyNote7devicessoldorexchangedintheUnitedStatesincooperationwiththeU.S.ConsumerProductSafetyCommissionandinpartnershipwithcarriersandretailers.”(SamsungExpandsRecall,2016).
Samsungendeditsinternalinvestigationinmid-Decemberandisexpectedtosharetheresultwithpublicbymid-January(Rutnik,2017).
ConclusionItishardtoevaluateifthiscrisishascausedcustomerstolosefaithinSamsungorifitwillhurtthebrandinthelongterm.Duringthecrisis,Samsungstartedtherecallprogram,issuedastatementwithanapology,andexpressedconcerns,whichwereallrightthingstodo.TheexpandedrecallonalldevicesindicatedthatSamsungputsafetyasatoppriority.But,onthedownside,ittookSamsungawhiletotakethatstep.Thegoodnewsisthatthereisalarge,loyalbaseofexistingcustomersofSamsungandtheNote7crisisisonlylimitedtoasingleSamsungproduct(Dholakia,2016).WhatSamsungshouldlearnfromthiscrisisistheimportanceofbeingpreparedandbeinghonest.Whenacrisiscomesout,thecompanyshouldassessthemagnitudeofthecrisisfirst,thenidentifythetargetaudience,acknowledgeyourreality,andbehumaninresponse(Honzalez,2016).WhatSamsungshoulddonextistodoapost-analysisaboutitscrisiscommunicationperformance.Samsungwillneedtorefineitscrisismanagementprotocolafterthecrisis.
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AppendixA-CommitmenttoSafetyFrom:http://www.samsung.com/us/commitmenttosafety/Toourvaluedcustomers,
AtSamsung,weinnovatetodeliverbreakthroughtechnologiesthatenrichpeople'slives.Animportanttenetofourmissionistoofferbest-in-classsafetyandquality.Recently,wefellshortonthispromise.
Forthiswearetrulysorry.Wetakeourresponsibilityseriouslytoaddressconcernsaboutsafetyandquality.In
collaborationwithgovernmentagenciesandindustrypartners,wearetakingproactivestepstodobetter.Anupdateofouractionsfollows.
Asyouhaveheard–orexperiencedpersonally–wehavestoppedproductionandrecalledourpopularGalaxyNote7device.WeareworkingswiftlytoensuretheremainingNote7saresafelyreturned.Forthosedirectlyaffected,weappreciateyourpatiencethroughouttheexchangeprocess.WeknowyouexpectmorefromSamsung,andthatyourloyaltyisearned,notgiven.
AcarefulNote7investigationisunderwayandthefindingswillbesharedwhentheanalysisiscomplete.Theprocesswillbethoroughandincludesomeofthebestindependenttechnicalexpertsintheworldtohelpinformandvalidateourwork.Wewillre-examineeveryaspectofthedevice,includingallhardware,software,manufacturingandtheoverallbatterystructure.Wewillmoveasquicklyaspossible,butwilltakethetimeneededtogettherightanswers.
Inkeepingwithourcommitmenttosafety,SamsungwiththeU.S.ConsumerProductSafetyCommissionalsojustannouncedavoluntaryrecalltoaddressarareissuewithourtop-loadwashingmachines.Fromfreein-homerepairtorebate,Samsungismovingquicklytoofferourcustomersunprecedentedremedyoptionsthatminimizedisruptiontotheirlives.Ourserviceteamsarevisitinghomesthisweektohelpresolveconcerns.
Ascommittedbyourcompany'sleadership,wearetakingproactivestepstoidentifyandaddresswhatwentwrongandhowweneedtoimproveouroperations.Samsungwillre-visiteverystepofourengineering,manufacturing,andqualitycontrolprocessessowecanmeetthehigheststandardsforexcellencemovingforward.
Mostimportantly,safetyremainsourtoppriority.Wewilllistentoyou,learnfromthisandactinawaythatallowsustoearnbackyourtrust.
Onbehalfofour17,000employeesacrossthecountry,wearegratefulforyourongoingsupportandagain,wearetrulysorry.Sincerely,GregoryLeePresidentandCEO–SamsungElectronicsNorthAmerica
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AppendixB-CommentsonTwitter
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AppendixC-CommentsonFacebook
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