Abstract

Samsung started as a food trade company in 1938 diversifying into different products, such as mobile and semiconductor businesses in the next few decades. Their main transformation into one of the most recognized brands in the world commenced in 1993 with their “New Management Strategy”. They renovated themselves from a company focused on efficiency into a company concentrating their resources on innovation and the manufacture of premium devices. Since then, they have grown into one of the most valuable companies leveraged by their competitive advantage in the form of their vertical integration, diversity of products and unrivaled research and development. On August 2016, Samsung released their most anticipated flagship device in ten countries: The Galaxy Note 7. It quickly became a symbol of Samsung’s world-class engineering as it included innovative features such as a thin, practical design and biometric authentication. Initially, the sales of this smartphone were thriving after it arrived to the public with outstanding reviews. Nevertheless, in late August, reports of devices exploding started to appear on the internet. Samsung responded quickly to these reports, announcing that customers were able to replace their current phones with new ones. However, Samsung’s replacements also caught fire. These series of events left the brand involved in the worst recall scandal in the history of the industry and the corporation. Samsung recalled approximately 3 million devices, costing them 17 billion USD dollars in lost sales. More importantly Samsung crisis occurred at a time when their position as a world leader in the mobile market was in jeopardy due to the growth of the Chinese manufacturers, especially in emerging markets such as China and India. This case study explores Samsung’s response to the recall crisis. It also provides an analysis of the mobile industry and the role of Samsung’s competitive advantage in their recovery from the crisis and future growth strategy.

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