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My Introspective

by Laurus Nobilis
My BrainCast

Strategic Management

5 Reasony Why Note 7 Is Making Samsung Stronger

Note 7 crisis will make Samsung stronger. The history teaches us that crisis makes companies stronger.


Posted: Oct 2016

Recent incident with flammable Note 7 made planetary focus on Samsung. As reaction to several dozens of enflamed Note 7s, they decided to totally halt production and sales, while withdrawing already sold quantity. Economists and publics are expecting Samsung to suffer huge financial and market loss through this situation.

This loss is obvious as the first thing to be expected from this situation. But, the most obvious things are usually not necessarily the truest. There are many facts that should be considered to understand the full picture. It is true that Samsung needs to go through tough situation. But still there are 5 major factors that are making Samsung winner even in such complex situation.


No Financial Loss

Samsung announced recall of 2.5 million Note 7 units. This is supposed to generate a huge financial loss. But the fact is that one million users decided not to return their Note 7. Knowing that production value is far below the sales value for premium phones (around 30%), we see that Samsung is even from financial perspective. Also, Samsung will be able to refund the taxes, due to this situation. Usually, the manufacturers are entitled to claim back taxes in case of faulty product. All this means that Samsung will not lose any money.


Withdrawn Note 7 Will Be Refurbished

Samsung will even make some money on Note 7. Samsung is well known champion of refurbishing and repacking old devices through Neo models or similar. It is most likely that Samsung will use most parts (except the battery of course) for some new device. Most of the parts will be used for the next year models.

Free Publicity

Samsung experienced unbelievable amount of free publicity. You may think that negative publicity is all just bad. But people like scandals. Even negative PR is still PR. Scandals are used everywhere as PR, intentionally or not intentionally. Some celebrities deliberately make "negative" PR by "accidental" publishing private nudity footage or claiming that they have been robbed for millions. It is highly unlikely that Samsung provoked this amount of publicity, but it will leverage this situation definitively.


Samsung Is Too Big, so Note 7 Will Not Hurt Them

After all, the Samsung is too big to be seriously harmed from this case. Big companies recover fast due to their size and diversification. Big companies do not have problem with failed project. We see that Microsoft suffered totally failure from mobile phone business, but that does not seem to hurt them much.


Consumer Is Shortsighted

Consumers are buying emotionally, not logically. Otherwise, they would buy a new mobile phone after the old one is broken after 3 years. Instead, average consumer is buying phone every year. Why? Because they buy based on need artificially generated by advertisement and cultural influence, not buy plain functional need. People do not use much logic when buying. This makes them forgetful and shortsighted.

The proofs for that are numerous. Typical example is Toyota scandal dating years ago, when many fatalities occurred due to malfunctioned controls in vehicles. Toyota faced scandal, their sales and share price went down. But, today Toyota is strong again, like nothing happen in the past. Consumers didn't punish Toyota for lost lives. Consumer is shortsighted and forgivable.

The same will happen with Samsung. The next year they will be even stronger.




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