TOO HOT

TO
HANDLE:
What Went
A PROPOSAL BY Wrong with the
HALEY CARSON Samsung Brand
Crisis Concerning
PROJECT the Galaxy Note7?
A CASE STUDY: SAMSUNG
PUBLIC RELATIONS CONTROL
AND COMMUNICATION ON
THE GALAXY NOTE 7
EXPLODING BATTERIES
 TABLE OF CONTENTS
ABSTRACT 3
OVERVIEW 4-6
COMPANY BACKGROUND 7
HISTORY OF SAMSUNG
COMPANY BACKGROUND 8
MISSION STATEMENT, VISION, VALUES
COMPANY BACKGROUND 9
COMPANY REPUTATION
TOO HOT TO HANDLE: PUBLIC RESPONSE 10 - 11
TOO HOT TO HANDLE: MEDIA RESPONSE 12 - 13

CRISIS IMPACT: REPUTATIONAL IMPACT 17 - 19

REFERENCES 20 - 22
 ABSTRACT

          In the summer of 2016, Samsung was ecstatic to release the anticipated Galaxy
Note7 along with additional accessories to accommodate the phone in August 2016. It
was set to be the most advanced Samsung phone released yet with increased security
functions, a smart pen for easier writing and notetaking, and a resistance to water. Soon
after the anticipated release of the newest edition to the smartphone industry, 35
incidents of battery cell issues concerning the Galaxy Note7 were reported globally
through the Samsung newsroom on September 2. They stopped selling the phone on this
day and the replacement opportunity was announced for those who currently had a
Galaxy Note7. Tensions and defective battery counts continued to climb as Samsung
struggled to navigate the recall notion worldwide. With media still circling the issue
regarding the batteries today, it is important to understand the totality of the Samsung
Galaxy Note7 crisis and develop a better comprehension of the prevalent disaster that
Samsung is still incurring currently.

APRIL 2017
 OVERVIEW
          On August 19, 2016, the newest edition to the Samsung collection called the Galaxy Note7
took the market as the official first day of public sales. Customers could pre-order the phone
starting on August 3, 2016, with exclusive offers bundled in addition (Samsung unveils the new
Galaxy Note7: The smartphone that thinks big, 2016). The phone was anticipated to break
records for Samsung as they had beaten their business opponent, Apple to the release of their
7th generation phone (Selyukh & Hu, 2016).  

The Galaxy Note7 is the best

phone we’ve ever built, and
it’s made even better by the
ecosystem of Samsung
devices that support and
enhance it. 
- TIM BAXTER
president of Samsung Electronics America
           On August 24, 2016, reports of customers who had purchased the Samsung Galaxy Note7
claim of battery defections, only six days after the initial release date (Kwon & Mullen, 2016).
Samsung releases their first official statement on September 2 through their newsroom. The
statement acknowledges 35 cases worldwide of Note7 battery defects and called to officially
end the sale of just-released Galaxy Note7 ([Official Statement] Galaxy Note7, 2016). In a
different report on the same day, the U.S. Product Exchange Program offers customers the
ability to get a new Galaxy Note7 with improvements in the next week or the ability to
exchange the current Galaxy Note7 for a Galaxy S7 or Galaxy S7 edge with the replacement
value given back to them. Consumers with select outlets were also able to receive a $25 gift
card or bill credit when choosing a Galaxy S7 family device or the Galaxy Note 7 within the
exchange program (Samsung announces U.S. availability of replacement Note7 devices as part
of voluntary recall, 2016).
          Within the following week, customers were strongly urged to shut down their Galaxy
Note7 phones as a precaution and participate in the exchange program. This week was also
when Samsung announced that the United States Consumer Product Safety Commission
(CPSC) was actively getting involved in the situation as a public safety issue (Samsung confirms
engagement with Consumer Product Safety Commission in response to Note7
battery issue, 2016). 

APRIL 2017
 OVERVIEW
In a newsletter dated for later in the September week, Samsung announces the improved
updated Note7 replacement phones on September 21, 2016, for those participating in the
exchange program and estimated around 500,000 new Note7 replacement devices available
were available for exchange (Samsung Galaxy Note7 U.S. voluntary recall update, 2016). The
new phones will be equipped with a new update that displays a green bar indicating the phone
is now safe for use and the battery issue has been resolved. The update also for older Galaxy
phones encourages users to power down their devices and participate in the exchange
program.
           In the early start of October when more issues with batteries, even on the "new and safe"
Galaxy Note7 phones arisen, it caused Samsung to extend their original recall status and the
exchange program to the customers with new or replacement Galaxy Note7's. This meant that
customers were eligible for up to a $100 total bill credit for those customers who exchanged a
Note7 for another Samsung smartphone or another option was to receive a $25 total bill
Samsung credit for a customer who exchanges a Note7 for a refund or other branded
smartphone (Samsung expands recall of Galaxy Note7 devices to include original and
replacement devices, 2016).
       The next day on October 14, 2016, the U.S.
Department of Transportation decided to ban all Galaxy
Note7 phones devices on carry-on and checked baggage
on flights as a safety standard (Jansen, 2016).
        Communication efforts became more sporadic at this
time, as Samsung seems to bring other products into the
light and focus on positive publicity efforts. Updates are
still encouraging customers who have not yet returned
their faulty devices to power down as soon as possible
and participate in the exchange program. 
        In early December, Samsung takes a more
aggressive approach to reach the 7% of customers who
have not yet returned their Galaxy Note7 products. With
an update launched on December 19 and will prevent any
Note7 phones from being able to receive a charge and
work effectively (Samsung taking bold steps to increase
Galaxy Note7 device returns, 2016).

Image from Samsung newsroom

APRIL 2017
 OVERVIEW

       After a quiet month on the Galaxy Note7 crisis, the U.S. Department of Transportation
decided to remove the Galaxy Note7 screening precaution on January 10 due to over 96% of
the defective phones being returned (FAA lifts airline notification on Galaxy Note7, 2017).
       As the dust settles, Samsung estimates that they had to recall 2.5 million of the Galaxy
Note7 phones during the incident, affecting customers all over the world (Mullen & Kwon, 2016).
While not only was Samsung's brand at stake and continues to be so, but customers wonder if
they can ever be faithful in a product from Samsung again. The following case study digs
deeper into the Samsung disaster and analyzes how and if their communication efforts were
successful throughout the crisis.

APRIL 2017
 SAMSUNG 
BACKGROUND
HISTORY OF
SAMSUNG
Est. 1938
          Samsung, known for its widespread electronics takeover, was originally created on March
1, 1938, by Byung-Chull Lee in Taegu, Korea (Kovach, 2013). The company had quite different
products than it does today, as during that time it was a food exporter that shipped products
like dried fish and flour to Manchuria and Beijing, China (About Samsung, 2008).
         In just over a decade, Samsung- which translates in English to mean "three stars" from
Korean- would have its own flour mills and confectionery machines, sales operations and
manufacturing. The company goes on to eventually evolve into a global corporation that still
bears the same name today but with a completely different brand identity (About Samsung,
2008).
         In 1958, the company was acquired by Ankuk Fire & Marine Insurance acquired which was
soon renamed Samsung Fire & Marine Insurance in October in 1993 (About Samsung, 2008).
This caused Samsung to expand its corporate boundaries into insurance and it also ventured
into textiles during this time (Kovach, 2013).
Samsung did not start in the electronic realm until the creation of Samsung Electronics in 1970
with the release of their first black and white television (Kovach, 2013). They later expanded into
the home electronics goods section that year with their washing machines, microwaves, and
refrigerators.
         The company continued to develop within the electronic sector during the 1980s with the
adaption to colored TVs, personal computers, tape recorders, and more (Kovach, 2013). This
was also the time where Samsung started to venture into North America by exporting products
there.
         Staring in the 1990s, Samsung focused more on producing hard drives and memory cards
personal computers use which still is one of Samsung’s main attraction products today
(Kovach, 2013). During that same time, Samsung began to emerge into the mobile industry,
creating its first internet-ready phone in 1999 (Kovach, 2013). Just before the move into mobile,
Samsung also created the world's first mass-produced digital TV in 1998 (Kovach, 2013).
Samsung has since expanded its horizons to a plethora of categories in electronics, with a focus
on televisions, smartphones, and tablets. In 2010, Samsung followed the trail of the Apple
IPhone and released the first Android Galaxy S smartphone of a series (Kovach, 2013).

APRIL 2017
 SAMSUNG 
BACKGROUND

Mission, Vision, Values

Est. 1938

          Samsung continues to make a better world through diverse businesses such as

advancing technology, semiconductors, skyscraper and plant construction, petrochemicals,
fashion, medicine, finance, hotels, and more. The accompanying company, Samsung
Electronics, leads the global market in high-tech electronics manufacturing and digital media
(Welcome to Samsung, n.d.).
         “As stated in its new motto, Samsung Electronics' vision for the new decade is, "Inspire the
World, Create the Future.” This new vision reflects Samsung Electronics’ commitment to
inspiring its communities by leveraging Samsung's three key strengths: “New Technology,”
“Innovative Products,” and “Creative Solutions.” -- and to promoting new value for Samsung's
core networks -- Industry, Partners, and Employees. Through these efforts, Samsung hopes to
contribute to a better world and a richer experience for all. As part of this vision, Samsung has
mapped out a specific plan of reaching $400 billion in revenue and becoming one of the
world’s top five brands by 2020. To this end, Samsung has also established three strategic
approaches in its management: “Creativity,” “Partnership,” and “Talent.” Samsung is excited
about the future. As we build on our previous accomplishments, we look forward to exploring
new territories, including health, medicine, and biotechnology. Samsung is committed to being
a creative leader in new markets and becoming a truly No. 1 business going forward (Vision &
mission, 2008).

APRIL 2017
 SAMSUNG
BACKGROUND
Company Reputation
Est. 1938

         A company’s reputation is an important factor in a stakeholder’s decision to join or endorse

the company. The stakeholders are an influential aspect of the company’s public, so it is
important to have reliable credibility and a solid reputation.
         Before the scandal, Samsung had been held to a high standard, as the company was
ranked by The Reputation Institute’s RepTrak®100 as the leader in corporate reputation. This
was held to several different criteria including corporate social responsibility, innovation,
product and services excellence, and creating a great workplace environment (Samsung
ranked #1 technology company in U.S. survey of corporate reputation, 2015). Samsung
Electronics was also ranked by the Reputation Institute as the most reputable technology
company in the United States (Samsung ranked #1 technology company in U.S. survey of
corporate reputation, 2015).
         According to Forbes, the company was also pocketing $195 billion in sales, $22 billion in
profits, and $210 billion in assets as of 2015. Samsung followed Apple as the leading market
share as of 2015 (Chen, 2015).
         The Harris Poll, a United States ranking system that rates reputations of the top 100 most
visible companies, ranked Samsung as the 7th most visible company in 2016. After the recall,
however, the plummeted to the 49th most visible company as of 2017 ratings from The Harris
Poll (Rahim, 2017). Throughout the recall process, the company was estimated to have lost
around $5 billion (Rahim, 2017).
         The company still needs time to recover from the recent recall of the Galaxy Note7 before
the reputation of the company, at least the Samsung Electronics division to be recognizable as
a dominant force in the market once more. 

APRIL 2017
 SAMSUNG PHONES:
 TOO HOT TO HANDLE

Public Response
Est. 1938
        The Galaxy Note7 recall was not the first step piece to the Samsung crisis that occurred in
2016. The company had received backlash from concern Note7 users via all social media
platforms regarding their smoking smartphones. With a rise in social media platforms, the
concerned people desperately wanted to grasp the attention of the corporation and they
hoped that they could reach the company through these outlets. As social media is a public
platform for all viewers to see content published, the steaming battery issue took a turn for the
worst with bystanders and apathetic publics immediately jumping to join in the crisis fuel.            
       Although Samsung kept a constant stream of updates regarding the issue, people
continued to be hesitant when considering the brand. The hesitancy still resumes today as the
crisis broke national and eventually global status. The public is unsure on whether to re-trust
the brand that allowed smoking and defective batteries to be sent to the common publics and
whether if their phones would also have issues. Despite the hesitancy, the public demonstrated
reliance to the Samsung brand with the pre-order numbers of the Galaxy S8 smartphones. 

Examples of public responses through various platforms:

Image from Bored Panda

APRIL 2017
 SAMSUNG PHONES:
 TOO HOT TO HANDLE

Public Response
Est. 1938

Examples of public responses through various platforms:

Image from The Sun

Image from Techwalla

APRIL 2017
 SAMSUNG PHONES:
 TOO HOT TO HANDLE

Media Response
Est. 1938
        The media has kept a watchful eye throughout the development of the Samsung Galaxy
Note7 crisis. The media relentlessly created articles and content regarding their speculations
on what went wrong with the phones as well as anxiously anticipating a cause for the smoking
batteries issue. The issue was covered throughout all platforms such as print, social media,
and public relations news releases in order to keep customers as well as other important
publics aware of the situation. While the public relations team of Samsung kept their following
up-to-date through their newsroom, they were also readily available through all of their social
medias to aid concerned customers. The media was also able to speculate the impending
impact of the recall on the company’s brand value as well as how much revenue the company
has lost as a result. The media also currently still updates on the crisis in order to inform those
who have been following the crisis as well as in the hopes that the official defect in the battery
and how it occurred will be released. With the constant pressure from the press, Samsung felt
an obligation not only to its influential publics but also the media to discover the truth behind
the defective batteries. Near the end of January 2017, the media and the public finally met heir
demanding quest for answers. Koh Dong-jin, president of Samsung’s mobile communications
business blames the defect of batteries on the unique flaws in the design of the phone that
included an unusually thin lining between the electrodes of the battery (Note7 fires caused by
battery and design flaws, Samsung says, 2017).
Examples of media responses through various platforms:

Image from Daily Magazine

APRIL 2017
 SAMSUNG PHONES:
 TOO HOT TO HANDLE

Media Response
Est. 1938

Examples of media responses through various platforms:

Image from New York Times

All images demonstrate the vast

and diverse feedback the
company was getting from various
media outlets. The response was
both negative and positive in
regards to how the issue was
handled as well as how to
improve their methods for their
reputation's sake.

Image from CNBC

APRIL 2017
 CRISIS IMPACT

Business Impact
Est. 1938

        Prior to the release of the Galaxy Note7 and the crisis beyond that, Samsung previously
held the 22% share of the global smartphone market in the three-month period ending June
30, 2016, according to research firm IDC (Mullen & Kwon, 2016). With almost $25 billion
knocked off from the company's market value in less than two weeks- during the first two
weeks of September- the company took a huge loss in the financial and business aspect from
the crisis (Mullen, 2016). Samsung still retains the number one global smartphone market
share, but the Galaxy Note7 did take its toll on the U.S. portion of the company. Apple moved
up to the number one position of the U.S. market share during the 4Q16, pushing Samsung to
second with 17.8% of the U.S. market share with Apple moving up to hold 17.9% of the share
(Gartner says worldwide sales of smartphones grew 7 percent in the fourth quarter of 2016,
2017).
       The crisis also allowed foreign competitors in China to propel their business ventures with
new phone releases, taking away again from Samsung’s share in that market. Samsung
competitors moved up to the number one holder of the market in China, which originally
before the Galaxy Note7 situation Samsung had done well in that market (Gartner says
worldwide sales of smartphones grew 7 percent in the fourth quarter of 2016, 2017).
       During the recall, some people were given new Galaxy Note7’s to replace their old with a
believed new and improved battery. Unfortunately, the new phones were also defective in
battery function and this caused the Department of Transportation (DOT) to ban the Note7 on
airplanes due to passenger safety while the exploding phones were still allowed on board
(Lopez, 2017).
      The company, with the value of recalling 2.5 million phones that were sold, was estimated
to have lost around $9.5 billion in revenue after abandoning the Note7 and was also estimated
that it lost around $5.1 billion in profits (Mullen, 2016).
      Although these numbers estimate disaster, Samsung was able to take these imperfections
of their products and strive to do better. Samsung took the challenge of their battery defects
head on when they decided to build a new test lab to discover what went wrong. The lab was
staffed with 700 researchers, 200,000 defective devices and defective 30,000 batteries in an
attempt to replicate the cause of fires in the Galaxy Note7’s (Lopez, 2017). They were able to
discover what exactly caused the batteries to overheat and explode as well as
 identify the different mechanism that would trigger the battery overheating.

APRIL 2017
 CRISIS IMPACT

Image from Samsung newsroom

demonstrating the exact cause of
the crisis after testing thousands
of devices from their laboratory.

APRIL 2017 PAGE 13

 CRISIS IMPACT

Business Impact
Est. 1938

        The fact that Samsung was able to identify and solve the issues with the Galaxy Note7
battery represents their commitment to their smartphone lines, which was just in time for the
release of their S8 preorders. Samsung claims to have instituted a new and improve checks
and controls on the phones to prevent any issues in light of what occurred with the Galaxy
Note7’s (Pressman, 2017). The new and improved models of Samsung's Galaxy S8 and S8+
phones are exceeding sales from their failed predecessor models by "strong double-digit"
percentages while also being at higher prices (Pressman, 2017). Preorders began on March 30,
2017. The new Galaxy S8 phone goes on sale to the public on April 21, 2017. 
The Galaxy S8 is our
testament to regaining your
trust by redefining what’s
possible in safety and marks
a new milestone in Samsung’s
smartphone legacy.
- DJ KOH
 president of mobile communications business, Samsung Electronics

Image from IDC

APRIL 2017
 CRISIS IMPACT

Reputational
Impact
Est. 1938
        While the Media continues to give mixed reviews on whether they believe that Samsung
Electronics can bounce back after the Galaxy Note7 crisis, it seems the public is willing to give
the company a second chance. As stated, the company has already surpassed the presales of
the Galaxy S7 and has received much anticipation from technology blogs.
       Although the sales might still be optimistic, it seems some customers are still concerned
about the lack of detailed communication during the Galaxy Note7 debacle. Some of
Samsung’s native country (South Korea) customers, whom are devoted to the Samsung brand,
have expressed frustration with the company's communication throughout the crisis (Selyukh
& Hu, 2016). While the communication team at Samsung U.S. was consistent with their news
releases and up-to-date information about the recall, the president was vague when
addressing the concerns of the public. It seems the company needed time and to demonstrate
their devotion to their following, which they proved through corrective action. While sales
might be soaring, it does not necessarily mean that company is 100% forgiven in the
customer’s eyes.
       Due to customer concerns, while repairing its image after the Galaxy Note7 crisis, the
company dropped 42 places in the U.S. Harris Poll as discussed in “Company Reputation”
portion of the case study for ratings in 2017 (Rahim, 2017). The company still maintains a large
portion of the market share, but was beaten by Apple for the U.S. market in 2017. The
hesitation to recall the phone in all markets globally might have had an impact in the ratings,
even though the U.S. was one of the first of Samsung branches to be recalled and offered
replacements.

APRIL 2017
 CRISIS IMPACT

Reputational
Impact
Est. 1938

        The critical issues for the company will be to overcome the lack of communication the
publics feel that they aren’t receiving being the most important on a global scale. The quality
of products is still an issue, but with less intense pressures as they company has attempted to
prove itself with finding the exact solution of the Galaxy Note7 errors by research and testing.
The overall image issue also comes into consideration, but time and proven assurance will
help ease people’s concerns about the Samsung brand.
       With the release of the Galaxy S8 and preorders being high, the company still has a
chance for redemption in both the media and the public’s minds, even with what some felt as
a lack of communication from the company. Overall, the company still has leaps and bounds
to prove its commitment to the Samsung smartphone industry and their customers in all
aspects of business, not just the products.

Image from The Verge

APRIL 2017
 MOVING FORWARD:
DECISIONS TO BE MADE 
BY SAMSUNG
Reputational
Impact
Est. 1938

        Throughout the entirety of the crisis, as it stretched for multiple months in the company’s
attempts to get back 100% of the defective Galaxy Note7’s, the company was successful in
crisis control. As people were panicked, their social media efforts went to console those
customers, but the lackluster recall options were offensive to some fans. With mixed reviews
on the methods they used to handle the crisis, it is evident that decisions made were of sound.
This is proven by the success of the S8 release and showing. Although fans and the company’s
following might not be completely over the Galaxy Note7 incident, the company was able to
get back on track.
       The company did try to communicate with their publics as openly and candid as possible
for a large corporation. In fact, in efforts to reach the 4% of the Galaxy Note7 public that has yet
to return their phones or those who are curious about the recall, the Samsung website still has
a link on their main page about the recall and what it entails. The company has also left all of
their newsroom releases open to the public viewing as well. This creates transparency within
the company’s brand and should not be a concern for the company’s following. The company
was also extremely successful in their corrective action efforts, this in part was due to their
reliance to the customers. Recalling an entire smartphone extension collection was a
responsible and demonstrative component of what type of values Samsung stand behind. The
recall and exchange program was constantly being instructed, and at times enforced by the
corporation to ensure that their customers were able to be safe and trust their products.
       What became clear about the way this crisis was handled, however, is that a consistent
and constant voice must be portrayed not only across all regional or national social media
channels, newsrooms or official company statements but also on a global scale. Controlling
the narrative is an important and influential aspect of a crisis, not just around the incident but
on a global scale as well. Samsung missed the mark on creating a unified voice in its recall
methods as well as informing the public. The Samsung U.S. news releases and twitter updates
satisfied concern U.S. residents but left the Samsung corporate floundering for widespread
communication efforts that created a voice that matched the U.S. consistency. While the
Samsung corporate president was in contact with the media, many felt that their concerns
were not being heard globally. The China market reflected this overlook by
selecting competing brands during the crisis. South Koreans went to the media
 to express concerns 

APRIL 2017
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http://www.samsung.com/us/aboutsamsung/

With the launch of Galaxy Note7, Samsung empowers users to do more. (2016, August 19).
Samsung Newsroom. Retrieved from https://news.samsung.com/us/launch-galaxy-note7-
samsung-empowers-users-gear-vr-gear-360-gear-iconx-level-active-connect-auto/

APRIL 2017