After Monday's news that Samsung had temporarily halted production of the Galaxy Note7, and yesterday's statement that it had banned all sales and asked consumers to stop using the device, the electronic maker confirmed late Tuesday that it would end production of the device altogether.
“Putting consumer safety as the top priority, we have reached a final decision to halt production of Galaxy Note7s,” a company statement said.
The move follows the apparent failure of Samsung’s exchange programme for the faulty Galaxy Note7, an attempt to address critical customer complaints that the handsets were catching fire.
The exchange allowed consumers to trade in faulty devices for new, safe ones, and Samsung's swift reaction was praised at the time as "an exercise in 'bold and brilliant' crisis management".
However, numerous reports of incidents, particularly from the US, have involved already exchanged devices, with one event leading to the evacuation of an airplane.
In a mark of how serious the problem is, Samsung yesterday had taken the extraordinary step of urging consumers to turn off their Galaxy Note7s. The company has also apparently started providing fireproof boxes for consumers to return the devices.
“Consumers with either an original Galaxy Note7 or replacement Galaxy Note7 device should power down and stop using the device,” Samsung said in an earlier statement.
Charles Lankester, senior vice president for crisis management at Ruder Finn Asia, told Campaign Asia-Pacific that the crisis has evolved further and faster than many could have predicted, and that Samsung’s initial response with the recall was the right strategy, for that point in time.
"Samsung’s decisions three weeks ago were in the context of an environment that was 180-degrees different to today,” he said. “This is the very paradox of crisis ‘management’: Smart decisions can look like stupid decisions based on new events or intelligence. Hindsight is always the brightest light. I would still argue that Samsung is doing many things right, but the business tidal wave they are experiencing would have engulfed many, if not most, corporations.”
Lankester added that there is undoubtedly a “blame game” now taking place, and management changes at Samsung can be expected in the future.
“Samsung will emerge from this one way or another," he said. "But one takeaway for anyone in business from this crisis? Don’t limit your thinking in terms of scenario planning. I doubt anyone advised the Samsung board to scenario plan and prepare for the Note7 to a) burst into flames, b) go through a global recall, c) be banned from flights and d) see production halted in October 2016. They should have.”
Estimates suggest killing off the Galaxy Note7 entirely could cost Samsung more than US$10 billion, and reports this morning say the company has lost US$14 billion in share value.
In addition, although Samsung has told consumers to “take advantage of the remedies available,” many feel they have received little guidance over what the next steps are for Galaxy Note7 owners. Many feel outraged at having twice been supplied with a combustible smartphone, but not having a clear recourse for solving the issue.
So far, only Samsung Canada has issued clear instructions to consumers, according to Mobile Syrup, which received a statement offering a full refund and hotline to call. This afternoon, reports emerged that authorities in Hong Kong are pressing the company, on behalf of frustrated consumers, to define return and refund procedures.
Recalling big recalls
Samsung now faces an unprecedented challenge to its brand reputation. Here are some other relatively recent examples of safety-related product issues and the impact they had on the companies involved.2015
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