Introduction
Samsung Electronics, one of the world’s leading technology companies, was founded in
Daegu, South Korea in 1938 by Lee Byung-chul. The tech giant originally started out as a small
grocery store, however Samsung quickly expanded into the trade and export of goods. In 1947
Samsung expanded into Seoul, South Korea but was forced to pull out during the Korean War in
the 1950s. During this time Samsung entered into the textile industry and built the largest woolen
mill in Korea.
In the 1960s and 1970s Samsung continued to expand its footprint and its reach and began
entering into the electronics industry where they broke into four electronic focused divisions.
The company produced its first black and white TV in the 1970s, as well as other consumer
products such as refrigerators and air conditioners. Samsung established its presence in the
United States during this time, establishing “Samsung Electronics America” and the Suwon
R&D Center.
In the 1980s, Samsung entered into the telecommunications hardware industry and began
mobile phone manufacturing. The company continued to expand globally, opening offices in
Germany, Portugal, and New York. During the 1990s, Samsung became a world leader in chip
production, formed Samsung Motors, and began producing digital TVs. Samsung’s goal was to
become the world’s largest electronics manufacturer.
Since the 2000s, Samsung has continued to innovate, developing touch-screen
prototypes, speech-recognition phones, and the popular Galaxy smartphone series. Furthermore,
Samsung has also expanded into other areas, such as medical technology, smart TVs, OLED
displays, and home automation. In 2014, Samsung announced Gear VR, a virtual reality device,
and in 2015, the company had more U.S. patents than any other company with 7,500 utility patents. In 2017, Samsung was given governmental permission to test a self-driving car, and in
2018, the company announced plans to expand into renewable energy and hire 40,000 employees
over the next three years. Today, Samsung is recognized as one of the most innovative and
successful technology companies in the world.
Situation
In 2016, Samsung faced a major crisis when the batteries of its newly launched Galaxy
Note 7 started exploding and catching fire. The Galaxy Note 7 was released in August 2016 to
and quickly became all the rave among Samsung loyalists. Upon its release, the Galaxy Note 7
was the best and most powerful phone on the market as it contained the company’s strongest and
most powerful technology to date along with brand new technology features that would become
available to consumers. (Heater, Techcrunch). However, within weeks of its release reports
began to surface of the device catching fire and exploding due to multiple issues with its battery.
Samsung initially tried to recall the affected devices and replace them with new batteries, but the
issue persisted. In the end, Samsung had to recall all Galaxy Note 7 phones, stop production and
sales, and issue an apology to customers. “Samsung hired three independent “quality-control and
supply-chain analysis firms” to conduct its investigation, with these firms concluding that two
separate faults affected the Note 7.” (Martin, Wall Street Journal) The company conducted many
investigations into the issue and found that the battery design and manufacturing process were at
fault. Additionally, batteries didn’t properly fit into the phone which led to the overheating of
both the battery and the phone itself which led to widespread issues and even the explosions of the device.
Challenge
The fall of the Galaxy Note 7 was coined “The most abrupt and spectacular fall for a
major company flagship of the smartphone era” (Heater, Techcrunch), and was a PR person’s
absolute nightmare! Due to the The Galaxy Note 7 battery issue being a major crisis for the
company, Samsung experienced estimated losses of over $5 billion. The Galaxy Note 7 battery
issue had significant consequences for Samsung as a company, both financially and in terms of
reputation and led to a number of challenges that the company was needing to overcome to
address the issue at hand.
The recall of the Galaxy Note 7 was the largest in smartphone history and resulted in an
estimated loss of over $6 billion for Samsung (some estimates even higher) and resulted in a
recall of more than 3 million of these devices that had been sold (Dholakia, Harvard Business
Review). In addition to the direct financial loss, Samsung’s reputation was severely damaged,
with consumers losing trust in the company’s products.The incident also resulted in a decline in
Samsung’s market share. According to a report by Counterpoint Research, Samsung’s market
share in the smartphone industry dropped from 22.3% in August 2016 to 18.7% in November
2016, following the Galaxy Note 7 recall. While Samsung took a massive financial hit that
sounded like the issue from this one device could take out the entire business, the company had
enough cash, and other business sectors to absorb that shock from the Galaxy Note 7 recall (LA
Times). The company also faced legal challenges and lawsuits from customers and investors,
with some accusing Samsung of not doing enough to address the issue.
Furthermore, the Galaxy Note 7 battery issue raised concerns about the safety of
lithium-ion batteries used in other smartphone companies– not just Samsung smartphones which
led to a heightened focus on battery safety across the industry. This incident prompted Samsung to implement new safety measures, including a multi-layer safety check for all its devices, and to
form a battery advisory group to oversee battery safety.
Overall, the Galaxy Note 7 battery issue posed significant challenges for Samsung as a
company, and it took time for the company to regain the trust of its customers and recover its
market share.
Solution
Samsung took several measures to prevent such incidents from happening again,
including implementing multi-layer safety checks for all its devices, forming a battery advisory
group to oversee battery safety for its devices as well as adopting stricter safety standards for the
smartphone industry. In a statement from the company they said, “‘We recently readjusted the
production volume for thorough investigation and quality control, but putting consumer safety as
top priority, we have reached a final decision to halt production of Galaxy Note 7s” – “For the
benefit of consumers’ safety, we stopped sales and exchanges of the Galaxy Note 7 and have
consequently decided to stop production”’ (BBC News).
Additionally, Samsung began launching a series of ads to restore the confidence of the
brand and its products. One ad titled “Commitment,” emphasized Samsung’s commitment to both
safety and quality control. The advertisement shows a glimpse of how their devices will now be
tested to ensure the safety of both its products and the consumers that purchased them. The
phones went through tests including cold temperature testing, drop testing, bend testing, as well
as an eight security point battery check. ( Claros, ManilaShaker). Another ad titled “Quality
Assurance” showed the company’s rigorous testing procedures and emphasized that the phones
are not only extensively tested, but retested again and again. ( Commercial Song). Samsung also
introduced a new flagship phone, the Galaxy S8, in 2017 which received many positive reviews and further helped to improve the company’s reputation. One review on the Samsung Galaxy S8
says, “ Samsung’s latest flagship has all the hallmarks of being one of the best phones of 2017,
with its excellent design and outstanding display… it’s likely to be the best phone for most
users” (Gondhia, Android Authority).
Koh Dong-jin, president of Samsung’s mobile communications business sector said during an
almost hour long presentation regarding the faulty batteries said “We are taking responsibility for
our failure to ultimately identify and verify the issues arising out of the battery design and
manufacturing process prior to the launch of the Note 7”’ (Mozur, New York Times).
Overall, Samsung’s efforts to regain consumer trust following the Galaxy Note 7 battery
issue and recall were successful. The company’s market share has recovered since the Galaxy
Note 7 battery issue and has continued to create and release new products.
In 2021, Samsung was ranked as the second-largest smartphone manufacturer in the
world, with a market share of approximately 16%. However, the incident with the batteries now
serves as a reminder of the importance of product safety and quality control for all companies,
especially those in the technology industry.
Conclusion
In conclusion, Samsung Electronics which was founded in South Korea in 1938, has
grown to become one of the world’s leading technology companies, however in 2016 faced a
major crisis. when its newly launched Galaxy Note 7 phone started catching fire and exploding
due to multiple issues with its battery, causing significant financial losses and damage to the
company’s reputation. Samsung initially tried to recall affected devices and replace them with new batteries, but the issue persisted which overall led to a complete recall of all Galaxy Note 7
phones and stopping the production and sales of the device. Samsung conducted several
investigations into the issue and found that the battery design and manufacturing process were at
fault leading to a significant challenge for the company. Samsung’s reputation was severely
damaged and its market share in the smartphone industry dropped significantly. Samsung
implemented new safety measures, including a multi-layer safety check for all its devices,
formed a battery advisory group to oversee battery safety, and created advertisments highlighting
their promise to ensure both safe and quality products from that point on. It took time for the
company to regain the trust of its customers and recover its market share but today Samsung is
recognized as one of the most innovative and successful technology companies globally.
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INTERNATIONAL ADVERTISING TERM PAPER– SAMSUNG
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Jackson Crow 
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