Remarkable Recovery: Samsung Crisis Management Case Study

Have you ever wondered how a global tech giant like Samsung managed to navigate a major crisis and bounce back stronger? 

In the world of corporate governance, effective crisis management can be the difference between irreparable damage to a company’s reputation and a successful recovery. 

In this blog post, we delve into a Samsung crisis management case study to learn about exploding batteries to the intricate strategies employed to restore trust.

Samsung’s journey offers valuable insights into the intricacies of crisis management in the digital age. 

Join us as we explore the key lessons learned and best practices from this high-stakes situation, shedding light on the remarkable recovery efforts that propelled Samsung forward.

Let’s learn about sailing through tough times through Samsung crisis management case study

Background of Samsung History and growth of Samsung as a global conglomerate 

Samsung, founded in 1938 by Lee Byung-chul, started as a small trading company in South Korea. Over the years, it steadily expanded into various industries, such as textiles, insurance, and retail.

In the 1960s, Samsung ventured into electronics, marking the beginning of its transformation into a global conglomerate.

With a focus on technological innovation and a commitment to quality, Samsung rapidly gained recognition for its consumer electronics products, including televisions and appliances.

Throughout the 1980s and 1990s, Samsung significantly diversified its business portfolio, entering the semiconductor, telecommunications, and shipbuilding industries.

This diversification strategy helped Samsung become a key player in multiple sectors, solidifying its position as a global leader. Notably, Samsung’s semiconductor division became one of the largest chip manufacturers in the world, supplying components to various electronic devices worldwide.

Samsung’s ascent continued in the 2000s, driven by its successful expansion into the mobile phone market. The introduction of the Galaxy series, powered by the Android operating system, catapulted Samsung to the forefront of the smartphone industry.

The company’s innovative designs, cutting-edge features, and aggressive marketing campaigns contributed to its rise as a major competitor to Apple’s iPhone.

With its global reach, Samsung has consistently ranked among the world’s largest technology companies, epitomizing South Korea’s economic prowess and technological advancements.

Samsung has also been considered one the best companies that successfully managed and implemented change initiatives.

Overview of Samsung’s position in the technology industry

In the consumer electronics segment, Samsung has established itself as a dominant force. Its diverse product lineup encompasses televisions, smartphones, tablets, wearables, home appliances, and audio devices.

The Galaxy series of smartphones, in particular, has enjoyed immense popularity and has emerged as a fierce competitor to other industry giants. Samsung’s televisions are also highly regarded for their cutting-edge display technologies, such as QLED and MicroLED.

The company’s advancements in semiconductor technology have contributed to faster computing speeds, increased storage capacities, and improved energy efficiency.

Samsung’s influence extends beyond consumer electronics and semiconductors. The company is actively involved in telecommunications infrastructure, including the development of 5G networks and the production of network equipment.

Samsung has also made notable strides in the realm of software solutions, including its own mobile operating system, Tizen, and various software platforms for smart devices.

Samsung Galaxy Note 7 Crisis

The Note 7 battery issue marked a significant crisis for Samsung, leading to a widespread recall of the flagship smartphone and causing considerable damage to the company’s reputation.

The crisis began in September 2016 when reports emerged of Note 7 devices catching fire or exploding due to faulty batteries. These incidents raised concerns about consumer safety and triggered a wave of negative publicity for Samsung.

Upon receiving initial reports of battery-related incidents, Samsung initially responded by issuing a voluntary recall of the Note 7 in September 2016. The company acknowledged the problem and expressed its commitment to addressing the issue promptly and effectively.

Samsung attributed the battery malfunctions to a manufacturing defect, specifically a flaw in the design that caused a short circuit.

To ensure customer safety, Samsung advised Note 7 owners to power down their devices and refrain from using them. The company swiftly implemented measures to exchange the affected devices, offering customers the option to either replace their Note 7 with a new unit or receive a refund.

Samsung also collaborated with mobile network operators and retail partners to facilitate the recall process.

In its initial response, Samsung took steps to communicate with customers and the public about the issue. The company published official statements expressing regret for the inconvenience caused and assuring customers of its commitment to resolving the problem. Samsung emphasized its dedication to quality and safety, promising to conduct thorough investigations and implement necessary improvements to prevent similar incidents in the future.

Media coverage and public perception during the crisis

During the Note 7 crisis, media coverage played a significant role in shaping public perception and amplifying the negative impact on Samsung’s brand.

The crisis received extensive coverage from both traditional media outlets and online platforms, leading to widespread awareness and public scrutiny. Here’s an overview of media coverage and its influence on public perception:

  • News Outlets: Major news organizations across the globe reported on the Note 7 battery issue, highlighting incidents, the recall, and subsequent developments. Television news segments, newspapers, and online news articles extensively covered the crisis , emphasizing the potential safety risks and consumer concerns. The constant media attention contributed to the widespread dissemination of information and increased public awareness of the issue.
  • Online Platforms and Social Media: Social media platforms played a pivotal role in the crisis, enabling the rapid spread of information and user-generated content. Users took to platforms such as Twitter, Facebook, and YouTube to share their experiences, express concerns, and criticize Samsung’s handling of the situation. Viral videos, photos, and personal accounts of Note 7 incidents gained traction, further fueling negative sentiment and influencing public perception.
  • Expert Analysis and Opinions: Alongside news coverage, experts and industry analysts provided their insights and opinions on the crisis. Their assessments of Samsung’s response, the potential causes of the battery issue, and the implications for the company’s brand reputation contributed to the overall narrative. Expert opinions had the power to sway public perception and shape the understanding of the crisis.
  • Consumer Forums and Discussion Platforms: Online forums and discussion boards dedicated to technology and consumer experiences became hubs for discussions surrounding the Note 7 crisis. Consumers shared their frustrations, exchanged information, and warned others about potential risks. These platforms served as gathering places for individuals affected by the crisis and amplified the negative sentiment surrounding Samsung’s brand.

Financial implications and losses incurred by Samsung

The Note 7 crisis had significant financial implications for Samsung, resulting in substantial losses for the company. Here are some of the key financial impacts experienced by Samsung as a result of the crisis:

  • Recall and Replacement Costs: The recall and replacement process incurred significant costs for Samsung. The expenses involved in collecting and replacing over 2 million of Note 7 devices, including logistics, shipping, and refurbishment, were substantial. The costs also encompassed the testing and certification of replacement devices to ensure their safety. The total recall cost was estimated at $5.3 billion.
  • Decline in Sales and Market Share: The crisis had a detrimental impact on Samsung’s sales and market share in the smartphone industry. As consumer confidence in the Note 7 and Samsung’s brand reputation declined, potential buyers shifted their preferences to alternative smartphone options. The decline in sales of the Note 7, coupled with the negative impact on the perception of other Samsung products, led to a loss of market share for the company.
  • Stock Price Decline: The Note 7 crisis had an immediate impact on Samsung’s stock price. News of the battery issue, recalls, and subsequent negative media coverage led to a decline in Samsung’s stock value. Samsung shares fell approximately to 7 percent right after 2 months of the crisis.

Crisis Management Strategy Employed by Samsung

Following are the key aspects of Samsung Galaxy Note 7 crisis management strategy:

Immediate actions taken by Samsung to address the crisis

In the face of the Note 7 crisis, Samsung swiftly implemented a range of immediate actions to address the situation and mitigate the impact on consumers and the company’s brand reputation. Here are some of the key actions taken by Samsung:

  • Voluntary Recall: As soon as reports of battery issues emerged, Samsung initiated a voluntary recall of the Note 7. This proactive step demonstrated the company’s commitment to consumer safety and willingness to take responsibility for the problem.
  • Temporary Production Halt: To address the root cause of the battery issue, Samsung temporarily halted production of the Note 7. This decision aimed to prevent further distribution of potentially defective devices and allow for thorough investigations and corrective measures.
  • Transparent Communication: Samsung made efforts to communicate openly and transparently about the crisis. The company issued official statements and press releases acknowledging the problem, expressing regret for the inconvenience caused, and reassuring customers of its commitment to resolving the issue. Transparent communication was crucial in maintaining trust and providing timely updates to affected consumers.
  • Collaboration with Authorities: Samsung collaborated closely with regulatory authorities and industry experts to investigate the battery issue comprehensively. By engaging external expertise, the company aimed to identify the root cause and develop effective solutions. This collaboration demonstrated Samsung’s commitment to finding the best possible resolution.
  • Customer Support and Safety Guidelines: Samsung provided clear instructions to consumers regarding the use of Note 7 devices, emphasizing the importance of safety. The company advised customers to power down their devices, participate in the recall, and utilize alternative devices in the interim. This approach prioritized customer safety and aimed to prevent further incidents.
  • Increased Battery Testing and Safety Measures: Samsung implemented enhanced battery testing procedures and stringent safety measures to prevent similar incidents in the future. The company adopted more rigorous quality control processes, including additional safety certifications and testing standards, to ensure the highest levels of product safety.

Communication strategies employed by Samsung

Samsung employed various communication strategies to address the Note 7 crisis and manage the impact on its brand reputation. Effective communication was crucial in maintaining transparency, addressing consumer concerns, and rebuilding trust. Here are some of the communication strategies employed by Samsung:

  • Official Statements and Press Releases: Samsung issued official statements and press releases to provide updates on the progress of the recall, investigations, and corrective actions. These statements expressed remorse for the inconvenience caused and reiterated the company’s commitment to customer safety. Clear and concise communication helped keep customers informed and reassured them that Samsung was actively working to resolve the issue.
  • Direct Customer Communication: Samsung directly communicated with customers to provide instructions and updates on the recall process. The company utilized various channels such as email, SMS messages, and notifications through its official website and smartphone apps. This direct communication ensured that customers received important information and guidance regarding the recall and replacement program.
  • Social Media Engagement: Samsung actively engaged with customers and the public on social media platforms, including Twitter, Facebook, and YouTube. The company responded to customer queries, addressed concerns, and provided updates on the progress of the recall. By engaging in two-way communication, Samsung demonstrated its willingness to listen, respond, and provide assistance to affected customers.
  • Collaboration with Industry Experts: Samsung collaborated with industry experts, battery manufacturers, and regulatory authorities to investigate the root cause of the battery issue. This collaboration was communicated to the public, showcasing Samsung’s commitment to finding solutions and ensuring that the necessary expertise was involved in resolving the crisis.
  • Advertisements and Marketing Campaigns: Samsung launched advertising and marketing campaigns focused on rebuilding trust and emphasizing its commitment to quality and safety. These campaigns highlighted Samsung’s dedication to addressing the issue and regaining consumer confidence. Advertisements often emphasized the company’s rigorous testing procedures and quality control measures to assure customers of the safety of its products.
  • CEO Apology: Samsung’s CEO issued a public apology, taking personal responsibility for the crisis and expressing regret for the inconvenience and concern caused to customers. The CEO’s apology aimed to convey sincerity, empathy, and a commitment to rectifying the situation, while also reinforcing the company’s accountability and determination to regain trust. The apology was published on a full page in 03 major US newspapers – the Wall Street Journal, The Washington Post and The New York Times.

Collaborations with regulatory authorities and industry experts

Samsung worked closely with government agencies and regulatory bodies in various countries where incidents related to the Note 7 were reported. The company shared information, conducted investigations, and cooperated with authorities to ensure compliance with safety regulations and guidelines. Collaboration with government agencies helped align efforts to address the crisis and establish industry-wide safety standards.

In the United States, Samsung collaborated with the CPSC, an independent federal agency responsible for ensuring the safety of consumer products. Samsung worked together with the CPSC to investigate the battery issue and coordinate the recall process. This collaboration ensured that the recall efforts followed established safety protocols and provided consumers with accurate information.

Samsung collaborated with battery manufacturers to investigate the specific manufacturing defects that caused the battery issue. The company worked closely with these partners to analyze the battery designs, manufacturing processes, and quality control measures. By involving battery manufacturers in the investigation, Samsung aimed to identify the root cause and implement corrective actions to prevent similar issues in the future.

Samsung engaged independent testing labs to conduct thorough assessments of the Note 7 batteries and verify the effectiveness of corrective measures. These labs specialized in battery testing and certification, providing expertise and unbiased evaluation of the battery performance and safety. Collaboration with independent testing labs helped validate Samsung’s efforts to address the battery issue and instill confidence in the effectiveness of the solutions.

Post-Crisis Recovery and Rebuilding 

Samsung implemented more stringent quality control measures across its product development and manufacturing processes. This included enhanced battery testing protocols, increased inspections, and stricter quality assurance standards. By demonstrating a commitment to producing reliable and safe products, Samsung aimed to rebuild customer trust.

Extended Warranty and Customer Support: Samsung extended warranty periods for existing and new devices, including the Note 7, to provide customers with added assurance. The company also enhanced its customer support services, ensuring that customers could easily access assistance, product information, and technical support. These initiatives aimed to demonstrate Samsung’s commitment to customer satisfaction and support.

  Launch of subsequent product lines and their impact on brand perception

Following the Note 7 crisis, Samsung launched subsequent product lines, including flagship smartphones like the Galaxy S8 and subsequent iterations. These launches played a crucial role in shaping brand perception and rebuilding trust. Key factors that influenced brand perception and the recovery process include:

  • Emphasis on Safety and Quality: Samsung placed a strong emphasis on safety and quality in its subsequent product launches. The company implemented rigorous testing procedures and introduced new safety features to ensure the reliability and safety of its devices. By highlighting these improvements, Samsung aimed to regain customer trust and reassure them of its commitment to producing high-quality products.
  • Positive User Experience: Samsung focused on delivering positive user experiences with its new product lines. This included improvements in design, performance, and functionality to enhance customer satisfaction. By providing users with exceptional products, Samsung aimed to rebuild its reputation and generate positive word-of-mouth, contributing to brand recovery.
  • Brand Messaging and Marketing: Samsung’s marketing efforts during subsequent product launches were carefully crafted to reinforce positive brand associations and regain customer trust. The company emphasized innovation, customer-centricity, and the commitment to quality and safety. Marketing campaigns highlighted features, benefits, and technological advancements to create a positive brand image and overcome the negative perceptions associated with the Note 7 crisis.

Final Words 

Samsung’s handling of the Note 7 crisis serves as a case study in crisis management. Despite the significant financial and reputational setbacks, the company took proactive steps to address the crisis, regain customer trust, and prevent similar incidents in the future.

The Samsung crisis management case study highlights the importance of swift and transparent communication, customer-centric actions, and continuous improvement in product safety and quality. By effectively addressing the crisis, Samsung was able to navigate the challenging situation and rebuild its brand, reaffirming its position as a leading global technology company.

Overall, the Samsung crisis management case study provides valuable insights into how a company can recover from a major setback, restore customer trust, and strengthen its position in the market through strategic actions and a relentless commitment to customer satisfaction and product excellence.

About The Author

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Tahir Abbas

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Crisis recovery case study: samsung 18 months on from the explosive s7 note.

In August 2016 the Samsung faced what was possibly the biggest crisis of its corporate history. In this article Robert McAllister looks at the causes of the incident, how Samsung reacted and the lessons that can be learned.

In August 2016 Samsung released their much anticipated new ‘big phone’ - the S7 Note. The S7 Note had a lot to live up to, namely competition from its rivals and the success of its older sibling the S5 Note (they skipped the S6 Note), which was widely regarded as the best Android phone of its generation.

With the S5 Note, Samsung had pioneered the concept of the ‘phablet’ or big phone. This provided consumers with a device that was packed full of high tech features in a package that was larger than a traditionally sized smart phone, but smaller than a tablet; Samsung was not going to give up its top spot easily.

The S7 Note, like the S5, was packed with the latest generation of tech and features, stealing a march on Apple’s range with an improved camera, better screen definition, processor speed and battery life. The latter would soon prove to be the S7 Note’s Achilles heel.

On 2nd August 2016 the launch of the S7 Note was met with very positive reviews by the press in the US and Asian markets, where the phone was initially released. Such was its popularity, Samsung struggled to keep up with the high levels of demand for the phone. However, shortly after its release, numerous reports emerged showing the charred remains of newly purchased S7 Notes, consistently claiming the phones were bursting into flames. Images were widely shared on both social and traditional media creating a PR nightmare, resulting in a complex product recall of 2.5 million S7 Notes and a technical challenge for Samsung’s engineers to identify the root cause of the issue.

To make the situation worse, the phones were banned on many airlines; during every pre-flight safety briefing Samsung was named and shamed, further damaging the brand and eroding consumer confidence.

The impact of the crisis was felt keenly by Samsung, who estimated the cost to the business was £4.4bn. Its 2016 Q3 profits dropped by 30 percent, driven by the cost of the recall and the resultant drop in sales caused by erosion of confidence in the brand. Samsung also lost its spot as the world’s top mobile phone company to Apple in Q4 of 2016. Such was the damage to the S7 Note’s reputation, Samsung were forced into killing off their flagship phone, with no immediate replacement.

How did Samsung respond?

Samsung acted quickly to implement a large-scale recall of the faulty S7 Notes, before it had carried out extensive testing and identified the cause of the issue. This proved initially to be a sound course of action and demonstrated to Samsung customers that it did care about their safety. 

However, Samsung made the decision to issue customers with replacement handsets, assuring them and the wider public that they were safe to use. When the same issue resurfaced, Samsung had to implement an embarrassing second recall; reversing the impression that they cared about customers’ safety and ultimately led to Samsung withdrawing the S7 Note from sale completely.

The second recall also led to questions being asked about Samsung’s competence in crisis management and product safety testing. Thankfully Samsung had delayed the launch of the handset in the large European market, thus allowing Samsung to focus its recall efforts within specific territories.

After the second recall was announced, Samsung realised it needed to do better and worked swiftly to identify the cause of the issue; initially they released only known facts, which hinted that the battery was causing the fires without speculating further. Only when Samsung’s engineers had identified the cause of the issue did they release a detailed report which was presented at a press conference three months after the recall was announced by DJ Koh, Samsung’s Mobile President.

The report presented a transparent and honest account of the problems with the Samsung S7 Note and identified a number of scenarios that could cause the batteries to self-ignite. Blame was levelled at a battery casing that was too small and an abnormal weld spot, both of which could lead the electrodes in the battery to compress, resulting in a short circuit.

The report also demonstrated Samsung’s commitment to identifying the cause of the issue where 700 engineers subjected 200,000 devices and 30,000 batteries to a range of tests at three separate manufacturing plants. At the press conference, Samsung also used external experts to verify their findings; academics and independent consultants lent credibility to the report’s findings.   

In the report Samsung also announced a new set of multi-layer safety measures, the formation of a new battery safety group, and a new eight-point battery safety test, seeking to reassure consumers that it had indeed learnt from the S7 Note’s failings

Finally, after the second recall was announced, Samsung demonstrated strong crisis leadership through the high level of engagement of its Mobile President DJ Koh, showing that it was committed to resolving the crisis.

What was the result?

Such was the damage to the S7 Note’s reputation, Samsung was forced into completely withdrawing it from sale. The company saw Q3 profits’ drop by 30 percent and the loss of the top spot to Apple. The first half of 2017 was going to be a key time for Samsung, in short, its next handsets the S8 and the S8 Note had to be exceptional and … not catch fire!

Samsung released the S8 Note in late April 2017, packed with market-leading tech that quickly established it as the Android of choice and, by the end of 2017 it won Tech Advisor’s coveted ‘best Android phone’ award. Samsung also used the marketing release campaign to emphasise that the S8 was the safest and most innovative phone that the company had ever produced, trying to firmly put the S7 Note crisis behind them.

The way Samsung handled the crisis, and the release of an excellent new flagship phone had set favourable conditions for Samsung’s recovery. By April 2017 a ReportLinker survey titled ‘Samsung Galaxy S8: Did Samsung Succeed in Restoring Trust’ showed that 89 percent of existing Samsung consumers would consider buying a Samsung phone again and 66 percent of non-Samsung customers would consider buying a Samsung phone at their next upgrade, up 15 percent from October 2016.

By January 2017 Samsung had also regained the top mobile company spot from Apple and saw strong growth in sales powered by the S8 range in the first half of the year.

In summary, the crisis was caused by a technical design flaw where the battery compartment was too small to safely house the high capacity battery. This led to the battery being compressed, causing it to short circuit and catch fire. This should have been picked up by Samsung in its safety testing, however lapses in quality control by Samsung stopped the issue being identified before the phone was released to the US and Asian markets.

But what led to this design flaw being missed? The mobile phone market is extremely competitive which has led to a technical ‘arms race’ between the major phone companies. This encouraged Samsung to try and steal a march on the industry by providing the S7 Note with industry leading battery life, achieved by squeezing a large battery into a smaller than ideal battery compartment. This of course led to the problems identified above.    

After a poor start, Samsung managed the short and medium-term impact of the crisis well, swiftly recalling the S7 Note, showing clear leadership and communicating in a transparent and honest manner. This set the conditions for them to mount an impressive recovery in 2017, regaining the trust of their customers, and confidence in the brand by the wider public, retaking the top mobile phone company spot back from Apple.

The crisis also made Samsung change the way it approached the release of new phone models. It has become more safety conscious, and the way it designs phones has become more strategically focused. Samsung, whilst still keenly focused on providing best in class phone hardware now also focuses on ensuring its new generations of phones are at the forefront of the digital software race, placing its handsets at the heart of the wider Samsung digital ecosystem offering.

The S7 Note crisis was a bitter pill to swallow for Samsung. However, by responding promptly to the short and medium-term aspects of the crisis and adjusting its strategy to overcome initial pitfalls, identifying and addressing its failings, Samsung has enhanced its business resilience for the future. 

Robert McAllister is Senior Consultant,  Instinctif Partners . Contact:  [email protected]

Find out how your crisis management system aligns with international best practice – give CrisisOptic, powered by Instinctif Partners, a go today and get your free business resilience score. Access it at  https://optic.instinctif.com

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Your score has been submitted - it will appear shortly., samsung: a lesson in customer experience and crisis management.

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When you hear the name Samsung in 2018, you think electronics. However, that wasn’t the case when the company was founded by Lee Byung-chul in 1938. Back then, it was a trading company dealing in textiles, food processing, insurance, and retail.

In the late 1960’s, Samsung entered the electronics industry. It was there that the company’s broad success took Samsung from its Seoul-based beginnings to the global market. The company prospered developing phones and tablets in the last decade via its affiliate, Samsung Electronics. It soon became one of the world's largest information technology companies, as well consumer electronics and chip maker by revenue.

In this post we’ll discuss how Samsung managed its product crisis. Leaning on customer experience best practices and the Net Promoter System®, Samsung was able to retain a significant portion of their customer loyalty, increase revenue and rebuild trust in their brand.

Galaxy Note 7: A Customer Experience Disaster

Back in 2016 and 2017 a series of scandals rocked Samsung's brand image and marketplace: the Galaxy Note 7 debacle and the jailing of Samsung Group’s heir .

In 2016, Samsung released its latest smartphone, the Galaxy Note 7. Just a few weeks later, terrified customers rushed to their social media channels with stories and pictures of the phone catching fire, and in some cases, even exploding. The incident went viral around the world.

Burned Samsung Galaxy 7

Although the company was quick to send out replacements, its stock lost $26 billion in value over the incident. Then, the situation worsened when the replacement phones suffered the same fate. Samsung had a problem. Not only were its customers dissatisfied with the product, they were also concerned for their safety.

Acting to Mitigate a Global Crisis

How did Samsung react to the crisis and why was it the right step? Open communication with customers on multiple channels helped Samsung close the loop on the most pertinent drivers of dissatisfaction—the Galaxy Note 7. If you’re unfamiliar with the concept, drivers represent unique touch points of a customer journey and are used in unison with the NPS question to pinpoint root cause.

Companies identify their key drivers in the second question of their NPS survey. The first question asks customers to rate their willingness to recommend the company to a friend or colleague on a scale of 0-10. This is the question that forms a business’ Net Promoter Score®.

The second question asks the customer to select their reason for the score. That way, regardless of whether a customer falls in the NPS detractor, passive, or promoter group, it is possible to accurately and scalably understand what the company needs to improve on, and what has worked well. If you want to know more about drivers, this CustomerGauge blog post is a great overview.  

Surveying customers is part of the Measure stage of the NPS program. When Samsung had enough information to understand their issue, it was time to enter the second stage— Act . Acting on NPS insights involves closing the loop, or pulling together resources to resolve issues, implement new best practices, and go back to customers in order to communicate the implemented changes.

Closing the Loop at Every Level of the Organization

To close the loop on their product issue, Samsung executed two initiatives:

Round-the-clock product development. The company sequestered its employees to address the smartphone malfunction. Engineers and product developers were mobilized to address the issue of overheating.

Communication with customers. Samsung stopped claiming that “battery issues” were responsible for the extensive product call-back. Going forward, the company admitted responsibility for the malfunction and proceeded to communicate with complete transparency.

As a result, Samsung’s internal communication reached an all-time high for 120 days. Frontline managers and employees directly addressed the customers that had purchased Galaxy 7. They alleviated the customers’ frustration and engaged in an open and honest dialogue.

The company’s mid-level managers promoted new and best practices across the organization, keeping an open line of communication between departments. They also monitored the colossal product investigation in which 700 engineers tested more than 200,000 devices and 30,000 batteries . Lastly, Samsung’s top-level executives worked around the clock to oversee both external and internal support to drive the company forward.

Blocked Samsung Galaxy 7 SmartPhone

In order to protect the remaining users of the Galaxy 7, Samsung developed a software that rendered the smartphone useless to encourage returns. Acknowledging that the smartphone was banned from most airlines, Samsung set up trade-in locations at airports to help customers get a new phone before they left the ground.

In total, the recalls, product testing, and damage control cost Samsung $5.3 billion . The company’s Net Promoter Score also took a significant hit. Prior to the Galaxy 7 crisis, Samsung had an impressive score of 67 in 2015. By 2017, that score fell by 23 points to 44. Although the damage was significant, it was not irreversible thanks to the quick response from every level of the company.

A little over a year later, Samsung successfully launched Galaxy 8 and Galaxy 9. The new and improved smartphones passed all safety regulations and were regarded as significant competitors in the mobile market. Today, Samsung’s Net Promoter Score is 47 . It is three points higher and sits somewhat below the Consumer Electronics industry average of 55 .

Samsung NPS

With the steady upward trajectory, Samsung is determined to grow its  customer retention even further in the next few years.

According to a survey conducted by the company at the end of 2016, Samsung's customers loyalty is stronger than ever as nearly 9 out of 10 would consider the brand for their next purchase. 

Samsung’s NPS Best Practices

There are many other examples that indicate that Samsung is heavily invested in its customer experience. 

1. Above and beyond service

Samsung has a “done plus one” motto and outlook on customer service. This involves training and empowering frontline staff to go above and beyond with customers. Frontline employees close the loop by touching base with the customer to evaluable their performance and ensure that the issue has been resolved. In this way, they have a significant potential of converting their passive customer group into promoters.

Part of this process includes implementing automatic chatbots for customers to speak to. The bots quickly discern the problem and refer the customer to a frontline employee that is trained to address that specific issue. The representative is able to use this dialogue to identify any extra favors or services he can provide. At the end of the interaction, the problem is dealt with, and the extra effort is paid off—it’s done plus one.

With a significant return on investment, this practice clearly works. In the first quarter of 2018, Samsung Electronics declared a consolidated revenue of KRW 60.56 trillion , a 20% increase in revenue for the company overall.

2. Assistive selling

Samsung practices assistive selling as a way to engage customers. While digital sales are very popular, Samsung observed that 75% of their customer base prefers to shop in a physical store, correlating with the fact that 85% of their sales still occurred through in-store purchases.

Samsung's Retail Store

Understanding the effectiveness of maintaining an online store, Samsung focused on perfecting the research stage in the customer journey (you can learn more about creating an omni-channel experience here ). Making their product pages informative, comparable, and easy to use, Samsung drew in many customers to its website and encouraged both browsing and purchase.

Afterwards, Samsung armed its in-store sales team with tablets carrying the same information and product metrics available on their site. Having instant access to information about the products improved the customer experience even further and encouraged their employees to become subject-matter experts.

The company does so well that it sells their assistive selling technologies to other retail chains and is regarded as a thought leader on the matter.

3. Social listening

Samsung is an active participant of social listening . This is when companies tune in to social media platforms, following trends and searching for mentions of their name. Social media is a place where customers share their thoughts and feelings about a product or service (and tend to be brutally honest in the process). This is a less direct way of identifying drivers.

Samsung carefully tracks what customers are saying about its brand and uses this data, in correlation with other NPS metrics, to guide their strategies and priorities. Social listening also helps Samsung evaluate its social media performance and control the narrative.

4. NPS and Revenue: Correlating Data Metrics

As mentioned earlier, Samsung’s consolidated revenue increased by 20% in the first quarter of 2018. Behind this impressive growth are successful customer engagement strategies derived from NPS best practices.  

Samsung values metrics. The company frequently sends both relationship and transactional surveys and identifies drivers in every step of their customer journey. The company prioritizes feedback and uses the information it collected to close the loop with their customers.

At the same time, Samsung correlates it’s NPS with revenue in order to understand the ROI for improving each driver. This helps the company understand which drivers will impact future growth and improves Samsung’s bottom line.

Final Thoughts

When you measure customer feedback and loyalty, you take the first step towards improving your customer experience. As a result, more customers become promoters and are likely to return, spend more on other products, and recommend the business.

Through a combination of customer loyalty and effective customer engagement, Samsung not only recovered after 2016, it was able to grow both its revenue and reputation. After the Galaxy Note 7 crisis, 63% of Samsung smartphone owners still believed that the future Samsung Galaxy S8 will be of better quality. At the same time, more than half of the respondents (56%) were still interested in buying future Samsung smartphones. Talk about the power of customer loyalty!

Samsung’s customers continued to have faith in its products, and Samsung learned the value of customer loyalty and retention. Tackling the problem head-on cost the company billions, but ultimately ensured Samsung’s survival in the highly competitive smartphone global market.

Today, Samsung continues pushing CX best practices and relies on a wide variety of collected data to influence its NPS strategy. It invests time and effort to implement NPS best practices on a company-wide level. Samsung is keen to take its competitors head-on and is currently on the right track to claiming an ample chunk of the market.

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samsung crisis management case study

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Social media usage in crisis communication: a case study of samsung.

Yihan Yu , Syracuse University

Date of Award

August 2020

Degree Type

Degree name.

Master of Science (MS)

Public Relations

Subject Categories

Social and Behavioral Sciences

Studies in public relations have revealed the importance of crisis communication in corporate image/reputation management. Public relations researchers and practitioners have also suggested the best practice of using both traditional channels such as press conferences, and social media platforms to respond to different crises. This thesis first reviews theories of crisis stage, crisis situation, crisis response as well as image repair and then integrates these theories in analyzing Samsung’s reaction to Galaxy Note 7 crisis. To conduct a throughout evaluation of the company’s performance, this study analyzes Samsung’s press resources, the company’s social media posts, and online customer reviews posted on its social media home page. The findings of this study show that, although the strategies Samsung selected matched with its crisis situation, the company made some mistakes when applying the strategies.

Open Access

Recommended Citation

Yu, Yihan, "SOCIAL MEDIA USAGE IN CRISIS COMMUNICATION: A CASE STUDY OF SAMSUNG" (2020). Theses - ALL . 468. https://surface.syr.edu/thesis/468

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How Did Samsung Overcome the Galaxy Note 7 Crisis?

How Did Samsung Overcome the Galaxy Note 7 Crisis?

Samsung is an electronics giant known across the globe for its smartphones and other devices. The sales of Samsung smartphones have been booming, giving stiff competition to other leading smartphone brands. People worldwide have appreciated Samsung’s flagship smartphones, such as Galaxy S5, Galaxy S6, and Galaxy S7, among others. However, things started going south with the launch of the Galaxy Note 7 (in August 2016), the successor to the Galaxy S6.

The Galaxy S7 was initially welcomed wholeheartedly through record-high pre-orders and sales. But soon, this smartphone turned into a nightmare for consumers who bought it, which led to the Galaxy Note 7 crisis. The Galaxy Note 7 smartphones were bursting into flames across the world.

A young girl in Minnesota had burned her hand from a Galaxy Note 7 explosion. There were countless reports from across the globe complaining about how these phones were overheating and exploding like bombs. These phones were nothing short of explosives that the consumers were carrying in their pockets, and soon, airlines banned passengers with Galaxy Note 7 from boarding planes unless they switched off their smartphones. The Samsung Galaxy Note 7 crisis was something that the brand had never seen before.

What Led to the Galaxy Note 7 Crisis?

Samsung, at first, notified that these explosions were because of some defective pieces and launched an exchange program, where they encouraged consumers to exchange their Galaxy Note 7 smartphones for a new batch of the same model. However, things soon turned ugly when even the replacements started exploding.

Samsung could not understand the cause of the Galaxy Note 7 crisis. The next logical step was to initiate a major recalling program for these smartphones. However, this Samsung Galaxy Note 7 crisis negatively affected the sales and reputation of the brand. To regain the trust of its customers, it was pertinent to identify the root cause of this debacle.

Samsung tested the devices, including charging (wireless and fast charging), iris scanner, USB-C charger, software, manufacturing, etc. They also partnered with independent labs to conduct studies on the cause of the Samsung Note 7 crisis. Their findings were uniform: the batteries malfunctioned, leading to overheating and subsequent explosions.

samsung crisis management case study

How Did Samsung Deal With the Crisis?

Setting an example for all brands, Samsung dealt with the crisis rather impressively. We break it down below.

1. They showed accountability

Samsung was quick to acknowledge problems with the Galaxy Note 7 models. They did not shirk the responsibility when the Galaxy Note 7 crisis ensued. They held a press conference and admitted that they were aware of the explosions. Although, they did not have any information on the cause of those accidents at that point.

2. They were proactive

Samsung was proactive in exchanging the models of the first batch as they believed there was some manufacturing defect. However, when the replacements started exploding, they did not waste any time before they began to recall all the Galaxy Note 7 pieces off the market. They sent alerts through e-mails and messages to return the Galaxy Note 7 models. Their only priority was the safety of the people; that’s why they partnered with telecom companies to send software updates that would disable the phone’s charging function, which would render the smartphone useless.

The recall of all Galaxy Note 7 phones from the market cost Samsung six billion dollars. In October, Samsung finally stopped the production and sales of the Galaxy Note 7.

3. They thoroughly investigated to discover the cause

Samsung built a lab where 700 researchers tested 200,000 phones and 30,000 batteries.

It was essential to determine the fault with the smartphones to remedy the situation and salvage Samsung’s brand image . They tested the phones under extreme conditions to emulate the circumstances when the phones exploded and found fault in their batteries. They communicated their findings to the media.

4. They brought in new quality check measures

Samsung devised a new and multi-step quality and safety check that all its manufacturers must follow. In addition, Samsung has made several internal changes since the Galaxy Note 7 crisis, like adopting more advanced safety measures, changing leadership, bringing in new members to do damage control, etc. Their challenge was not only to deal with the Samsung Note 7 crisis but to earn back the loyalty and trust of the customers.

5. They improved overall processes

Samsung went the extra mile to show that it could design and manufacture stable, high-end smartphones and that they were no less than any of its competitors. The company conducted studies across the various departments and made the necessary changes to improve multiple aspects of the smartphone manufacturing processes. As a result, future smartphones released will be the most tested devices with fewer bugs and top-notch hardware.

Samsung’s proactive attitude and the desire to be better have struck a chord with its loyal customers. As a result, Samsung has significantly revived its losses and has proved to be worthy of customers’ love and support over these years.

6 Learnings from the Samsung Note 7 Crisis Management

Here are a few lessons to be learned from the Samsung Galaxy Note 7 crisis management.

1. Acknowledge the problem

Samsung’s quick acceptance of its faulty Galaxy Note 7 pieces showed the way for other brands to take ownership of their mistakes.

2. Act quickly

It is crucial to be proactive in such situations to determine the cause and do damage control. Samsung recalled all the Galaxy Note 7 phones and completely halted the production and sales of the model in a matter of two months. Changing the policies and internal workings is essential to remedy the larger picture.

3. Improve safety standards

Samsung has also shared its learnings from this Galaxy Note 7 crisis with the world so that other companies and manufacturers can benefit from them and be more cautious while manufacturing components of smartphones. The Samsung Galaxy Note 7 crisis and the company’s increased attention to the quality and safety of its smartphones influenced other brands to up their quality check processes and introduce better standards to the industry.

4. Strive to identify the root cause

Instead of hiding information or not owning up to the problem, it is fundamental to know what caused the crisis. Samsung did not rest until it had unraveled the mystery of the Galaxy Note 7 crisis.

5. Communicate effectively

Samsung updated its customers about every new finding or decision regarding the Galaxy Note 7. This built a sense of trust among the customers who had been disappointed due to such mishaps.

6. Apply your learnings to future projects

Any crisis can be a lesson to move forward and improve. Samsung used this fiasco to improve its manufacturing process and quality checks and implemented improved methods for newer launches. These measures showed that Samsung cared for its customers, and hence, the customers did not irrevocably lose their faith in the brand.

Yes, Samsung made a huge mistake with the Note 7 and disappointed its customers. But it owned up to its mistake, acted instantly, worked tirelessly, and has come back stronger than before. The South Korean brand has shown it is larger than any Galaxy Note 7 crisis. Loyal customers have recognized their effort and put the explosion episode behind them. They have embraced the brand again. Through its efficient management of the debacle, Samsung has proved that a failure does not define the future of a brand as long as they decide to learn from it.

The Samsung Galaxy Note 7 crisis led to the brand halting the manufacturing and sales of only the Galaxy Note 7 model. However, Samsung Galaxy Note 8 recovered all the damage done by Galaxy Note 7. Galaxy Note 8, launched in 2017, was a flagship phone loved by the people.

Samsung acted hastily and exchanged the faulty Note 7 phones. Then, realizing there was a problem with the entire range and not just one isolated batch, they called back all the Note 7 phones from the market, even though they lost six billion dollars.

Samsung Note 7 had faulty batteries that got overheated and exploded like bombs. These explosions had harmed several people across the globe. Upon understanding that the phones’ batteries were faulty, Samsung decided to discontinue the range.

Samsung Galaxy Note 7 explosions were standalone instances. Samsung has implemented stringent quality assurance checks and battery safety systems to ensure such accidents never occur again.

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Samsung, Shame, and Corporate Atonement

samsung crisis management case study

Understanding outrage in different cultures.

South Korean political leaders are more determined than ever to correct the country’s reputation for being too lenient on the country’s family-controlled business dynasties known as chaebol . The winner of South Korea’s presidential election, Moon Jae-in, is coming to power in the wake of a corruption scandal that ousted President Park Geun-hye. Her impeachment followed the arrest of Samsung’s de facto leader Lee Jae-yong on bribery charges. Samsung’s path to repairing its damaged reputation is different than if it were based in a Western country. The hidden rules of redemption differ across cultures. In guilt cultures, which exist generally in Western countries, redemption derives from executives serving jail time and company fines and settlements. But in a shame culture such as Korea’s where the public decides what is right, global companies are much more vulnerable. Global firms often fail to manage such crises because they focus on proving innocence. Samsung fundamentally needs actively accept moral and social responsibility. Now is the time for the executives’ culture of loyalty to the “family” to be replaced by a culture of loyalty to the “organization.”

For the past several months, South Korea has been roiled by accusations of corruption in its government and major businesses. The role of the country’s family-run businesses, and whether or how they are held to account for wrongdoing, is under intense scrutiny.

samsung crisis management case study

  • Rosa Chun is a professor of business ethics and corporate social responsibility at UCD Michael Smurfit Graduate Business School.

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The Most Useful Crisis Management Examples: The Good, Bad, and Ugly

By Andy Marker | August 19, 2020

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Review crisis management examples to learn from others’ experiences with this comprehensive collection of case studies. Examples are organized by theme, and include crisis management successes and failures.

In this article, find crisis management examples organized by best practice , five of the costliest crises ever (and what was learned) , and examples of companies that have built the world’s most valuable brands by safeguarding their reputations.

What Is Crisis Management?

Crisis management refers to the practice of preparing for negative incidents, minimizing their damage and disruption, and getting an organization back on track as quickly as possible. Crisis managers anticipate likely threats and develop strategies to cope with their impact. To read more about crisis management please visit our "The Essential Guide to Crisis Management" article.

Effective Crisis Management Examples

Effective crisis management occurs when an organization employs skillful planning and a proactive response to avert a crisis entirely, limit its severity and duration, or turn it into an opportunity. These examples feature organizations that responded with transparency and agility.

CPG Product Crisis Management Example: Tylenol Product Tampering

In 1982, seven people in the Chicago area died after taking Tylenol capsules poisoned with cyanide. The tampering was believed to have occurred when someone injected the chemical into capsules and returned them to store shelves. The deaths remain unsolved, but the way Johnson & Johnson handled the episode has become a teaching case study for effective crisis management at Harvard Business School and elsewhere. In 2003, Fortune magazine named James Burke, the company’s CEO at the time, as one of history’s greatest CEOs for the way he handled the scare. 

Below are some highlights of Johnson & Johnson’s handling of the crisis:

  • Fast and Decisive Action: According to a book on the case by Harvard Professor Richard Tedlow, on the afternoon of the first two deaths, the company halted all product advertising, sent 450,000 messages to hospitals, doctors’ offices, and other stakeholders, and established toll-free hotlines for consumers. At a cost of more than $100 million, the company recalled all products from store shelves — one of the first nationwide recalls — even though government officials felt that doing so was excessive. Additionally, Johnson & Johnson issued warnings to consumers not to take its pain reliever. 
  • Honesty and Integrity: Despite evidence that the poison was introduced via store shelves, Johnson & Johnson did not try to evade blame. As a result, Burke was praised for his honesty. His integrity stood out in the context of the post-Nixon era and the unforthright handling of the Three Mile Island nuclear disaster. The company became a pioneer in developing tamper-proof packaging, and eventually moved away from capsules to a more tamper-resistant caplet. Burke was candid in expressing regret that the company had not done so right away. 

In less than a year, Tylenol regained its market share and sales leadership, and according to a BrandSpark study, it continues to rank highly for consumer trust.  

For a comprehensive look at crisis management in the Tylenol deaths, see this profile of Burke’s leadership and analysis of Johnson & Johnson communications .

Healthcare Crisis Management Example: Global Pandemic

While the global pandemic that began in late 2019 challenged many organizations, the calamity also highlighted examples of strong crisis management. 

The Cleveland Clinic Abu Dhabi operates as a U.S. medical center in the United Arab Emirates. The hospital faced COVID-19 early in its migration beyond China. The clinic responded quickly in order to both expand its emergency capacity and continue providing care for cancer and transplant patients, as well as for those with other complex needs. 

Dr. Rakesh Suri, CEO of Cleveland Clinic Abu Dhabi, says that forming a crisis management team (that included individuals from all levels of the organization) was a critical step, as doing so enabled the hospital to act with agility. The medical center also coordinated with other local hospitals to maximize resources and play to each institution’s strengths. 

The executive team took extra steps to take care of staff, including talking honestly about their emotional challenges and providing sleeping rooms, meditation space, online workouts, nutritious food, counseling, and childcare. 

An in-depth case study on the hospital surfaced several lessons, including the importance of preparing for worst-case scenarios, leaders empowering their teams to solve problems innovatively, encouraging candor, proactively engaging all stakeholders, and taking care of physical and mental well-being. 

In business, companies had to pivot quickly as the pandemic changed the marketplace. A 2020 Harvard Business School study of 350 senior executives in China who faced the crisis early found some key commonalities among those who managed effectively, including the following:

  • Improve decision-making by moving away from the hierarchical model.
  • Collaborate in new ways with customers, suppliers, regulators, and even competitors.
  • Support remote work by changing company culture to prioritize trust and results over command-and-control and physical presence. 
  • Ask employees to self-select for challenging assignments in order to get maximum ownership and motivation. 
  • Embed new learning and innovative digital strategies that arise in a crisis into your organization’s muscle memory.

Examples of Bad Crisis Management (and What They Teach Us)

In contrast, examples of poor crisis management are usually marked by fundamental errors in preparation or execution of an emergency plan — and sometimes both. Often, these problems compound, which only multiplies the scale of the crisis. 

This is especially true in so-called black swan events — incidents that are extremely rare, have severe consequences, and are generally perceived in hindsight to have been obvious to happen. Since the likelihood of a black swan event occurring is low, leaders may dismiss the risk (if they are even conscious of it). But, the grave consequences of black swan events can pose a much larger threat.

Following are real-world examples of weak crisis management and the lessons crisis managers can take from them.

Natural Disaster Crisis Management Example: Hurricane Katrina

In August 2005, Hurricane Katrina hit the U.S. Gulf Coast and flooded New Orleans, causing more than $100 billion in property damage and killing more than 1,800 people. Even though the hurricane began as a natural disaster, the scale of the catastrophe was man-made. Various analyses of the response, including a report by Congress, focused on weak aspects of the crisis management and highlighted the following important lessons:

  • Preparation Is Key: In 2006, a study by the Army Corps of Engineers found that the levees built to protect New Orleans from flooding were incorrectly engineered, poorly built, and insufficiently funded. Additionally, government officials who were aware of the storm forecast did not make provisions to evacuate residents who did not have cars or could not afford bus fare, which left tens of thousands of vulnerable people stuck in the city. The government also didn’t position enough emergency supplies in New Orleans ahead of the storm.
  • Train Your Crisis Team: The Federal Emergency Management Agency (FEMA) was led by officials who were political appointees and had no experience in disaster management. A congressional review found that agencies handling the response were unsure of their roles and responsibilities. Government agencies failed to learn from a drill of a similar hurricane hitting New Orleans the previous year. 
  • Simplify Communications and Decision Making: Federal and local crisis managers struggled to communicate due to equipment failure and incompatible technologies. Confusion among different levels of government paralyzed decision making. Ultimately, the crisis plan was too complex — with 29 federal agencies playing a role, duties were unclear and too much red tape hampered efforts. 
  • Act Quickly but Not Rashly: About $2 billion spent by FEMA in Hurricane Katrina was wasted or fraudulently claimed, according to a New York Times analysis. In many ways, this was a symptom of a poorly planned and executed crisis response. For example, FEMA ordered $100 million in excess ice that truckers shuttled around the country for weeks while the agency tried to figure out where it should go (after storing it for two years, the government melted the ice). Additionally, the agency spent $7.9 million to renovate a former army base as a shelter in Alabama that only 10 people stayed at (the shelter closed within a month). Half of the mobile homes ordered as temporary housing — at a cost of $430 million — went unused.

For in-depth case study of Hurricane Katrina crisis management, see “Katrina and the Federal Emergency Management Agency: A Case Study in Organizational Failure. ”

Industrial Disaster Crisis Management Example: Bhopal Gas Leak

In 1984, a toxic gas leak from a Union Carbide India pesticide plant in Bhopal, India killed up to 30,000 people from immediate and long-term effects (according to estimates) and injured about 575,000. The accident is one of the world’s worst industrial disasters. 

The leak was caused by the introduction of water into a chemical tank, which resulted in a heat-generating, runaway reaction. Several inquiries found evidence of company negligence, but an internal analysis blamed employee sabotage. 

Researchers have written extensively about the accident, and some of the lessons cited are universally helpful in crisis management, including the following:

  • Rehearse Emergency Procedures: The plant did not have an emergency plan, and plant operators did not know how to handle an emergency. No effective public warning system or public education about the risks were in place. 
  • Prioritize Crisis Readiness: The company reduced training and staffing at the plant to save costs. Supplies of gas masks were inadequate, and several plant safety mechanisms were either deactivated or faulty. Additionally, several experts found that there weren’t enough operators for the unit to function safely. On the night of the accident, the supervisor delayed investigating an initial small leak until after a crew break, rather than being proactive. 
  • Share Information: A U.S. Union Carbide plant found earlier in the year that a runaway reaction in the chemical tank could happen, but they didn’t communicate it to the India plant. When the leak occurred, plant staff did not inform senior managers or local authorities. Most of the information on the chemical involved, including how to treat exposure, was proprietary and was not disclosed. So, public health authorities and hospitals in Bhopal did not know immediately what victims had been exposed to (and therefore couldn’t provide the best antidotes).   

For in-depth case studies on the Bhopal accident, see Union Carbide Corp.’s site dedicated to the tragedy, as well as “ An Analysis of the Bhopal Accident” and “ The Bhopal Disaster and Its Aftermath .”

Five of the Most Costly Corporate Crises and Their Lessons

In addition to the human toll, a crisis can also be financially devastating for a company and its shareholders. Aside from direct costs, businesses may face fines, damage claims, legal settlements, damage to brand value, exodus of key revenue-generating staff, competitive disadvantages, and stock price declines. 

Social media has compounded these effects. A study by Pentland Analytics that compared corporate crises in 2000 and 2018 found that social media amplified damage, doubling the loss of shareholder value (from a 15 percent to a 30 percent decline in the first year after a crisis). 

The most costly crises have multi-dimensional financial impacts. Following are some examples of calamities that caused extensive financial damage to the companies.

Five of the Most Expensive Corporate Crises and their Lessons

1. Example: BP Deepwater Horizon

In 2010, BP’s Deepwater Horizon oil-drilling rig in the Gulf of Mexico exploded, killing 11 employees and causing an oil leak that lasted for three months. This is the biggest oil spill in U.S. history. 

The oil spill devastated the environment and tourism. Damage to the environment has been long-lasting — one study valued the impact at $17.2 billion . The spill also caused billions of dollars in negative economic impact on tourism in the region. Meanwhile, the financial toll for the company included the following costs:

  • Through early 2020, BP paid about $70 billion in clean-up costs, legal settlements, and fines.  
  • In the two months after the spill, the company’s shareholders lost $105 billion as its stock price plummeted. 
  • For a time, the company’s survival was in question. Its bonds crashed in value, and the company had to stop paying dividends for three quarters.
  • In the United States, the BP brand faced a backlash from consumers, and BP gas stations saw sales drop 10 to 40 percent in the immediate aftermath of the spill.
  • BP had to reduce its business spending for years, which analysis said put it behind competitors such as Shell, whose brand value rose 24 percent that year, according to Interbrand. BP dropped from the second-largest global oil company in 2010 to fourth, where it has remained.

Crisis Management Lesson: Create a Safety Culture Studies have attributed the accident to a series of human mistakes and technical failures in the context of a high-risk corporate culture and weak regulatory supervision . The studies noted overconfidence on the part of BP, based on many years of not having an offshore well blowout in deep water. They also cite a lack of planning for low-probability, high-impact oil spills.

Operators and managers grew accustomed to normalizing signs of potential trouble and ignored weak signals of looming disaster. Alarm systems on the rig were suppressed, and crucial equipment was not properly maintained. The Center for Catastrophic Risk Management at the University of California Berkeley blamed the absence of a safety culture and shortsighted prioritization of the bottom line. According to the center’s report, BP “forgot to be afraid.”

2. Example: Wells Fargo

For 14 years, until the practice was exposed in 2016, hundreds of thousands of Wells Fargo employees opened customer accounts without consent to meet sales targets and generate fees for the bank. The financial consequences included the following:

  • The bank paid more than $7 billion to settle government investigations and private lawsuits. 
  • Wells Fargo lost business from the state governments of California and Illinois, as well as from the cities of Chicago, Philadelphia, and Seattle, among others who cited the illegal behavior as the reason. 
  • In response to the scandal, in 2018, the Federal Reserve imposed a limit on the bank’s growth, putting Wells Fargo at a competitive disadvantage and costing it an unknown amount of potential increase in customers and loans.
  • The company lost $220 billion in stock market value in the two and a half years after the enforcement action. The stock hit a 10-year low in May 2020, faring far worse than its peers.  
  • The bank has racked up heavy expenses related to the crisis, including legal fees, investigation costs, and spending on an ad campaign aimed at restoring consumer trust.

Crisis Management Lesson: Live Up to Your Company Values to Avoid Scandals According to the government, Wells Fargo executives were aware of the abuses as early as 2002, but failed to act despite espousing a culture of integrity. The executives imposed such aggressive sales targets for staff that many employees said they felt they had no choice but to engage in the illegal practices. The government is pursuing some individual executives for their roles. 

For an in-depth discussion, you can read the full report issued by the U.S. House of Representatives .

3. Example: Equifax

In 2017, Equifax, a credit reporting bureau, suffered a data breach that gave hackers access to sensitive personal information for 147 million consumers. The incident was the most expensive data security breach to date. In 2020, four members of China’s People’s Liberation Army were indicted in the United States in the breach. 

  • The company had $1.7 billion in legal settlements, fines, fees for consultants, lawyers, and investigators, and the cost of providing credit monitoring and identity protection to consumers. 
  • In the week after Equifax disclosed the breach, the company lost $5.3 billion in market valuation as its stock price declined 31 percent. 
  • For the first time ever, a credit rating agency downgraded its outlook on a company over cybersecurity concerns. A credit rating downgrade increases a company’s borrowing costs. Moody’s dropped its rating on Equifax to negative from stable in 2019, two years after the breach, citing continued high costs related to the hack. Moody’s further projected that the spending would continue to hurt Equifax’s profitability. 

Crisis Management Lesson: Take Crisis Prevention and Planning Seriously A congressional investigation found that relatively basic mistakes at Equifax led to the breach. For example, the attack occurred through a server vulnerability that was a known issue. Equifax had previously notified its system administrators to patch the issue, but the person responsible for the point of entry did not get the message because Equifax’s email list was out of date.

An expired digital certificate allowed malicious network activity to stay hidden. Proper data governance protocols, which limit user access to sensitive information, were not in place — this allowed the attackers to run about 9,000 queries to find the consumer data. The attack lasted about 76 days before it was discovered.

The company’s public response contained many missteps (including directing consumers to a website that had bugs, according to IT experts) and as such, did not inspire confidence. For example, the site asked consumers, who had just had personal information stolen via Equifax, to enter most of their Social Security numbers to find out if they were included in the hack. The company mistakenly tweeted a phishing link for the response website four times instead of the correct URL, according to Wired magazine. 

Crisis management experts said Equifax lacked comprehensive prevention and response plans and faulted the company’s slow disclosure. (Equifax discovered the breach in July 2017 but did not reveal it until September 2017.) Given the sensitivity of the information in their database, Equifax should have had much more robust preparation, experts said.

For details on crisis management planning, see “ Step-by-Step Guide to Writing a Crisis Management Plan .” You can also use one of these free disaster recovery planning templates to help get your business back on track.

4. Example: JP Morgan Chase

In 2012, a trader in JP Morgan Chase’s London office, nicknamed the London Whale, ran a portfolio of esoteric derivative investments. The trader was part of a team whose mandate was to hedge the bank’s operating risks. But, the whale’s investment strategies turned out to be flawed, and the size of these transactions was so great that they affected world credit markets. The whale’s trades ultimately lost money on a massive scale, and the company sustained the following financial impacts:

  • Investment losses of $6.2 billion.
  • JP Morgan Chase received fines of more than $1 billion by U.S. and British regulators.
  • Senior executives were stripped of $75 million in compensation after an internal investigation.
  • The company had to pay one hundred and fifty million to settle a shareholder class action lawsuit.
  • A loss in stock market value of $14.4 billion in the two days after disclosing the problem.
  • The company’s reputation as a careful risk manager was also damaged. In 2012, research company Interbrand found that the value of JP Morgan’s brand had dropped 8 percent, to $11.5 billion. 

Crisis Management Lesson: The C-Suite Needs to Stay on Top of Risk When he realized the full potential for disaster, the London Whale, whose real name is Bruno Iksil, suggested that the company immediately take a loss on the positions. This move would have resulted in much less financial damage. 

But, according to a U.S. Senate report, his managers began to conceal the magnitude of losses. They produced a shadow spreadsheet and hoped the investment positions would turn around, which resulted in mounting losses.

Reviews of the episode found that risk-management practices for the division were less rigorous than for other areas of the bank. First, the bank ignored warning signs from its risk metrics and then changed the risk standards (so the warning signs went away), according to a company report. 

Although people internally realized the potential extent of losses, bank management downplayed them in public. In 2012, CEO Jamie Dimon dismissed the incident as a “complete tempest in a teapot,” the Senate report said, a position he would later reverse.

The bank‘s investigation found that there was too little scrutiny of the London activities by its top management. In the aftermath, the bank strengthened risk management and made the review team more independent to address the group-think mentality that limited questioning of the investment strategy, JP Morgan said. The episode sparked calls for tougher regulation.

5. Example: Facebook

In March 2018, a whistleblower told two newspapers that a British firm called Cambridge Analytica had bought data about 87 million users and their friends without their consent from Facebook. The company used the data to build voter profiles that Cambridge sold to election campaigns, including Donald Trump’s presidential run. 

The episode sparked a scandal over user privacy at Facebook, the biggest of many. CEO Mark Zuckerberg was called to testify before Congress. The company faced investigations by regulators in the United States and Britain, as well as lawsuits from several jurisdictions. 

The financial repercussions included the following:

  • The U.S. Federal Trade Commission imposed a $5 billion fine against the company — the largest ever. The FTC said Facebook’s behavior violated a previous consent decree with the agency. The Securities and Exchange Commision fined the company $100 million and British regulators fined 500,000 pounds. 
  • Engagement on Facebook dropped by 20 percent in the months after the scandal, a metric that affects the company’s ad revenue.  
  • Facebook users’ confidence in the company dropped 66 percent in the weeks after the scandal broke and Zuckerberg testified before Congress, according to a Ponemon Institute survey. Some users quit Facebook (including 3 million Europeans) in the subsequent months over privacy abuses. The hashtag #DeleteFacebook began trending on social media, and public support for tighter regulation of social media grew. 
  • Growth in Facebook revenue and users dropped in the quarter after the Cambridge Analytica affair. The company’s stock valuation lost $130 billion in two hours after the news, weakening the social network’s forecast further. 
  • Facebook sustained a drop in brand value of 6 percent (about $2.9 billion) for the year to $45.2 billion, according to Interbrand.

Crisis Management Lesson: Apologize When You are Wrong U.S. investigators found that Facebook violated consumer trust by allowing a third party to collect users’ personal data without their knowledge. The data collectors also violated Facebook policies that required deleting the data. 

Facebook CEO Zuckerberg was silent for five days before issuing a statement acknowledging that mistakes had been made. Facebook users heavily criticized the response, prompting Zuckerberg later to say, “I’m sorry” in media interviews. IT experts said the response was slow and underwhelming. 

Critics faulted Facebook for technical decisions that resulted in app developers being able to access information about users’ friends, saying safeguards were inadequate. Commentators such as Tufts University cybersecurity expert Susan Landau also criticized Facebook for not taking legal action against Cambridge Analytica and for failing to inform users whose data was taken until well after the news broke. 

The company placed full-page newspaper ads, made changes to data-handling practices, and implemented other reforms, but consumer trust remained damaged. Analysts said Facebook’s gestures, including its lack of apology, rang hollow and came too late.

Best Crisis Managers Safeguard Their Brands

Protecting your reputation is an important aspect of crisis management, and conveying authenticity and empathy is paramount when anyone is harmed.

Reputation research firm RepTrak found in a 2020 survey of 80,000 consumers globally that corporate responsibility (made up of workplace quality, governance, and corporate citizenship) accounts for 41 percent of its reputation. (For details on how and when to apologize, see “ Models and Theories to Improve Crisis Management .”) 

Corporate reputation is an important influence on consumer behavior. RepTrak data shows a company with an excellent reputation activates willingness to buy among 79 percent of consumers, compared to 9 percent for companies with poor reputations.

Companies that maintain strong reputations through the decades are typically examples of strong risk and crisis management. But that is not to say they have necessarily avoided all calamities: sometimes, these organizations have faced a pivotal crisis and turned it into an opportunity to achieve long-term reputation strength.

Reputation is the primary determiner of brand value, which is a company asset that can be worth billions. Interbrand found that the value of the top 10 global brands in 2019 was collectively almost $1 trillion.

Top 10 Most Valuable Global Brands*

  • Apple: $234.2 billion 
  • Google: $167.7 billion
  • Amazon: $125.3 billion
  • Microsoft: $108.9 billion
  • Coca-Cola: $63.4 billion
  • Samsung: $61.1 billion
  • Toyota: $56.2 billion
  • Mercedes: $50.1 billion
  • McDonald’s: $45.3 billion
  • Disney: $44.4 billion

*Source: Interbrand, 2019

Crisis Management Examples by Best Practice

Crisis case studies help illustrate best practices and how companies apply them. The following examples show how crisis management leaders and laggards performed on fundamental best practices in specific situations.

Crisis Management Best Practice: Form a Crisis Team

While you should have a designated crisis management team, you may also need smaller teams focused on particular issues. Cross-functional teams are often especially effective. Free team members from their normal duties while they are handling the crisis, remove constraints, and give them the resources they need, such as specialized external experts. When the crisis is over, review the team’s performance. (For more about crisis management teams, see “How to Build and Effective Crisis Management Team.”

Example: When Volkswagen faced a crisis over its diesel-emissions scandal, Oliver Larkin, group head of investor relations, told IR Magazine that the company “immediately put in place a task force team, with representatives from the communication side but also from the technical side and the legal side evaluating the information as it was coming through – and those people were working 24/7.” The group’s focus was on messaging, VW’s reputation, and relationships with major investors, and other responsibilities were put aside. Specialists, who were situation consultants, also joined the effort.

Crisis Management Best Practice: Have a Plan

Hopefully, your crisis management plan includes a communications plan that you’ve detailed in advance. But if not, or if you overlooked anything relevant to the crisis at hand, do some quick planning at the beginning of the crisis. Make sure to plan for social media, and draft holding statements. To learn how to write a plan, read “ Step-by-Step Guide to Writing a Crisis Management Plan .”

Examples: In a case study of what not to do, Amazon faced negative attention around its 2019 Prime Day shopping promotion. Staff around the world protested over alleged poor working conditions and abusive company policies. Actions leading up to and on the day sparked media coverage, calls for legislative action, and late-night TV segments. Amazon did not comment publicly, defying public relations best practices. PR experts speculated the company did not have a crisis communications plan to mitigate the damage. 

As an example of strong crisis communications, the American Federation of Government Employees, the union representing 700,000 employees of the U.S. federal government, responded to the coronavirus crisis with a multi-pronged communications plan. The goal was to draw attention to concerns over a shortage of protective gear and testing, policies, and short-staffing.

The union sued the federal government for hazard pay, and then targeted individual agencies by publicizing the plights of their staff to the media with press releases, TV appearances, and a daily newsletter. Internally, the union sent daily email alerts and digital campaigns to local leaders, weekly updates to members, mass texts, and memes to get the word out.

Crisis Management Best Practice: Pick the Right Spokesperson

Choose an individual who has the knowledge and training to address the crisis and is in a position of authority. You can coach the right person on working with the media, but putting a representative who lacks expertise in front of the cameras will backfire: your organization will come across uninformed or incompetent.

Example: During the coronavirus pandemic, Dr. Anthony Fauci, Director of the National Institute of Allergy and Infection Diseases for more than 30 years, brought expertise to his role as explainer in chief to the American public. 

He conveyed the importance of citizens staying home with clear and consistent messaging, and he deftly handled complex questions about science from the media. He gave interviews on social media, podcasts, sports shows, digital news sites, as well as traditional media, to reach all demographics, including teenagers.

Crisis Management Best Practice: Be Present

In a serious crisis, leaders should always be on site, either at headquarters or the location that makes the most sense. Cancel business trips, and return from vacations.

Example: In early 2020, wildfires burned more than 20 percent of Australia’s forests and killed 26 people. During the disaster, Australian Prime Minister Scott Morrison faced an outpouring of anger from citizens and intense media criticism after secretly taking a Hawaiian vacation and having his staff deny it. 

The prime minister’s representatives refused to disclose his location, igniting a social media storm and dominating media coverage. Then, an Australian tourist shared a photo he snapped with the leader on a Hawaiian beach. The government had to backtrack, which caused huge embarrassment and a scandal about the cover-up.

Crisis Management Best Practice: Respond Quickly

Issue a statement within the first hour of a crisis and publish frequent updates. Keep customers and other stakeholders informed about progress. If you’re unsure about frequency, err on the side of too much communication, rather than too little.

Example: In 2018, after switching delivery companies, Kentucky Fried Chicken (KFC) suffered supply problems that caused a shortage of chicken at its U.K. restaurants. The company was forced to close more than two-thirds of its locations. 

Even though the crisis response group initially had little information about the problem, the team quickly acknowledged the issue publicly. Within hours the team explained what had happened, how it was being addressed, and when it would be solved.

“Our instinct was that we had to face the issue head on: a chicken restaurant without chicken. Not ideal,” a spokeswoman for KFC told Raconteur at the time. “We were responding live as we received new information. We acted fast in assessing the issue and working out the best approach.”

In a negative case study, General Motors in 2014 did a series of vehicle recalls due to faulty ignition switches that affected 30 million cars. The company ultimately paid about $4.1 billion in repair costs, victim compensation, and fines.

But perhaps even more damaging was the revelation that the automaker had known about the problem for at least a decade , at one point blaming the fault on short drivers and heavy key chains. The resulting publicity and congressional hearings harmed GM’s reputation, and one senator described the company as having a “culture of cover-up.” 

Use a crisis communications strategy template to help you assign important responsibilities and build a process and response plan in the early stages of a crisis. For all other crisis management templates please visit our template article . You can also learn about step-by-step instructions on how to build a strong crisis management strategy , including free templates and tips from experts.  

Crisis Management Best Practice: Be Compassionate

Respond empathetically to show that your organization cares about people. Fear of lawsuits often causes companies to resort to carefully parsed legal language or circumspection. While minimizing liability is important, showing your human side goes a long way to winning goodwill and defusing anger, which often is a motivating factor in lawsuits. 

Example: In 2019, Boeing responded to news that its 737 MAX airplane had caused two crashes and killed 346 people due to faulty software by insisting the aircraft was safe and that there was no engineering or technical problem. 

The CEO blamed poor pilot training. Governments around the world grounded all the planes. Crisis communications experts criticized Boeing’s handling as slow, legalistic, and lacking empathy. Moreover, they noted that Boeing’s stated values include acting with the highest ethical standards, taking personal responsibility, and valuing human life above all else, and that these should have guided its response.

Crisis Management Best Practice: Speak the Truth

Be upfront and transparent, and don’t hide behind euphemisms or jargon. The truth will eventually become clear, and obfuscating will only cause further mistrust and resentment.

Example: In a negative case study, United Airlines forcibly removed a 69-year-old doctor from an overbooked flight leaving Chicago in 2017. Security officers dragged him off the plane. A passenger captured the scene on video and bystanders reported the officers threw the man against an armrest. The doctor later said he lost two teeth and had a concussion and broken nose. 

United CEO Oscar Munoz told employees by email the passenger had been “disruptive and belligerent.”  In a public statement, he said the airline had to “re-accommodate” the man, a euphemism for the procedure of removing a paying passenger from the flight so an airline employee could have the seat.

The video of the doctor’s rough treatment went viral on social media and showed that the doctor had not acted out as Munoz claimed. United faced a wave of public anger, and its stock lost $1.4 billion in value. Munoz later apologized and promised the incident would not happen again, but his planned promotion to United’s chairman was canceled.

Crisis Management Best Practice: Focus and Move Ahead

Give the crisis full attention, but do not lose sight of your future. Whenever possible, align your crisis response actions with the long-term vision and overarching goals of your organization.

Example: In early 2020, Delta Air Lines (like all carriers) faced a catastrophe as a global pandemic virtually eliminated demand for airline travel. While challenges persisted, the airline began working toward regaining financial stability. 

CFO Paul Jacobson, who crafted and led Delta’s financial crisis response to the Sept. 11, 2001 attacks, canceled his announced retirement to help rebuild the airline. To accomplish this task, Jacobson used strategies such as securing emergency government aid and deferring long-term capital spending.

Crisis Management Best Practice: Communicate Clearly

Present information openly and in a way that others can understand. Recognize that personal perspective influences how everyone interprets information. Don’t hide from bad news.

Example: In 1986, the Space Shuttle Challenger disintegrated little more than a minute into flight, killing all seven crew members. Investigations found the cause was the failure of an o-ring seal in a solid rocket booster that allowed pressurized burning gas to escape and cause structural disintegration.

Poor communication and decision-making were determined to be major contributing causes to the disaster. The investigating commission found the launch should not have been approved. They cited a lack of effective communication between the decision-makers and the engineers, the absence of a formal communications channel which isolated management, and selective listening. The panel found the decision to proceed with the launch was based on incomplete and misleading information.

Crisis Management Examples by Type: Social Media, Product Problems, and More

Crisis management case studies are especially instructive when you compare how two organizations coped with relatively similar problems. The following examples are organized around crisis type, including social media crises.

Examples of Social Media and PR Crisis Management

Social media has enabled users to spread negative or embarrassing information about a brand in a nanosecond. Companies need to monitor social media actively and act quickly to address public relations problems. Unflattering episodes can go viral, severely damaging a company’s reputation.

Examples of Good Social Media Crisis Management

The most effective uses of social media to address company crises are typically characterized by speed and, when appropriate, humor — although companies should also address underlying issues. 

  • Example: Popeye’s In 2019, Popeye’s debuted a fried chicken sandwich that consumers praised on Twitter, comparing it favorably to rival Chick-fil-A’s offering. Chick-fil-A responded with a tweet promoting its sandwich as “the original.” Popeye’s shot back cheekily, “Y’all good?” The retort ignited the so-called “chicken-sandwich wars,” which Popeye’s won as Americans flocked to its stores.
  • Example: Red Cross In 2011, the American Red Cross defused a crisis over a rogue tweet with humor. A staff member mistakenly sent a personal tweet to the organization’s account: “When we drink we do it right #gettngslizzerd.” As the tweet started to spread, Red Cross defused the PR nightmare with this tweet acknowledging the error: “We’ve deleted the rogue tweet but rest assured the Red Cross is sober and we’ve confiscated the keys.” A beer brand mentioned in the original tweet responded by asking its fans to donate to the Red Cross.
  • Example: Tide In 2018, teenagers uploaded to social media videos of themselves eating Tide laundry detergent pods, which are poisonous, in the “Tide Pod Challenge.” Rather than trying to ignore the controversy, manufacturer Procter & Gamble swung into action by lobbying social media platforms to remove the videos, mounting a communications campaign, and placing its own video of NFL player Rob Gronkowski urging people not to swallow the pods on social media and broadcast television.

Examples of Bad Social Media Crisis Management

Crises can start or worsen on social media when brands display insensitivity or are slow to react to growing negative engagement. Following are some examples of companies that mishandled social media.

  • Example: Gillette In 2019, razor maker Gillette sought to promote the values of the #MeToo anti-sexual harassment movement with a video that it placed on YouTube and in ads. After a century of promoting men who use its products as alpha males and virile, the company in the video first showed men bullying and mansplaining, and then contrasted them with empathetic men who stop others from bad behavior toward women. Despite some scattered praise, the video got twice as many dislikes as likes on YouTube, and calls for a Gillette boycott arose. Twitter users bashed the company for negatively stereotyping men and shaming its customers.  
  • Example: Tinder In 2015, dating app Tinder responded to a negative article about it in Vanity Fair magazine with a 31-tweet rant. The tweets were defensive, included profanity, and a claim that the app had helped people in North Korea meet dates. The overreaction made Tinder the butt of jokes and drew negative attention to the company. 
  • Example: Applebee’s In 2013, a waitress at restaurant chain Applebee’s posted a customer’s receipt on Reddit (with the name visible). The customer had written a critical comment about an automatic 18 percent tip added to the bill for a big party. Applebee’s said on Facebook, “We wish this situation hadn’t happened.” Thousands of negative comments flooded in every hour. The story went viral, and Applebee’s response was panned by PR experts as pouring gasoline on the fire. The company’s social media team answered Twitter comments by copying and pasting its corporate policy statement, which users perceived as a snarky response. Then, failing to keep up with the flood of reaction, the company disabled user posts on its Facebook page. Next, the team posted an update with the corporate statement, hiding the previous statement and more than 20,000 comments. Users perceived the tactic as deleting their posts, which enraged them.

Examples of Crisis Management Involving Product Problems

Product crises can be especially damaging for companies because their sales and brand are likely to suffer. Effective crisis management can ensure that the fallout is minimized. Poor crisis management can make it worse.

Examples of Good Crisis Management of Product Problems

Companies that manage crises caused by faulty products well show concern for customers, take responsibility for the issues, and respond decisively with improvements.

  • Example: Mattel In 2017, toy maker Mattel recalled nearly 2 million toys that were tainted with outlawed lead paint. The act angered parents and attracted regulator attention. The problem stemmed from a contract manufacturer that used paint not authorized by Mattel. Within a few days, Mattel identified the factory, halted production, and launched an investigation. The company voluntarily expanded its review and made two more product recalls, even adding an unrelated problem. The company imposed stringent new tests on products before they could be sold, changed suppliers, and put its own staff in contract manufacturing plants. Mattel communicated consistently and repeatedly apologized. The company won praise for its swift and honest response, and the company now enjoys a reputation of trustworthiness.
  • Example: Samsung In 2016, Korean electronics company Samsung faced a crisis when its Galaxy Note 7 smartphones exploded due to a battery problem. Sales slumped as airlines banned passengers from carrying the phone on board. Samsung responded by immediately taking accountability, being transparent about not immediately knowing the cause, and vowing to determine the problem. The company put 700 engineers on the problem and opened the research to third parties. When the problem was identified, the company communicated the issue clearly and introduced quality assurance and safety features. Samsung also launched a campaign aimed at tying its brand image to a larger purpose and improving its culture. In the next year, Samsung’s brand value rose 9 percent, according to Interbrand, and its Galaxy S8 yielded record profits the following year.

Examples of Bad Crisis Management for Product Problems

Examples of poor crisis management by companies over product issues are often marked by slow acknowledgement or even denial.

  • Example: Takata Japanese auto parts maker Takata produced car airbags that exploded and were linked to at least 14 deaths. Governments recalled some 70 million airbags by 2017. Studies of the problem found design and engineering flaws. Before the extent of the problem became clear, Takata did not want to face embarrassment or prosecution. A senate report found that the company manipulated test data and did not adequately address safety concerns. The report concluded the company’s safety culture was broken. Takata ultimately went bankrupt with an estimated $15 billion in liabilities for recall and other costs.
  • Example: Nike In 2019, U.S. star college basketball player Zion Williamson sprained his knee when his Nike shoe broke, little more than 30 seconds into a highly anticipated game. The crisis quickly gained the name “shoegate” in the media. The company’s stock dropped $1.1 billion the next day, social media buzzed with jokes and jabs, and commentators described the incident as a brand failure. While the incident did not inflict long-lasting damage on the company, Nike was panned for waiting for three hours to issue a response. They stumbled by minimizing it as an “isolated incident,” while media reports pointed out four other recent similar shoe malfunctions.

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APPLE VERSUS SAMSUNG PATENT LAWSUIT: AN ISSUE AND CRISIS MANAGEMENT APPROACH

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Crises are commonplace and it can be happened at any point of the organization process. Thus, it is worthwhile for the organization to identify the early plan of issue or potential risk occurring within organizations, as a small scale antagonist can pose a serious threat to the protagonist. Hence, it is not easy to win the reputation warfare. Thus, this paper aims to examine the crisis clusters in the Issue and Crisis Management Relational Model by applying on one of the cases which is Apple and Samsung patent lawsuit. The model suggested several stages which include pre-crisis management and post-crisis management. The discussion of the case will be surrounded on the two (2) clusters on the crisis management part, which include crisis event management and post-crisis management. The review of the case showed that Apple had won the lawsuit warfare and Samsung need to pay for the financial loss as a result of copying the design of the Apple's product. In addition, the review also showed that the model need to be seen as an integrative approach, rather than as a sequence of process. This has called upon the management, especially the public relations or corporate communication department to look into the clusters that has been suggested to form a strategic solution to safeguard the organization's reputation when the crisis strike.

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The Crisis Management of the Samsung Note 7 Explosion: a Study Based on Public Reception

This study is about “The crisis management of the Samsung Note 7 Explosion: A study based on public perception. The study was carried out because the latest smartphone product, the Samsung Note 7 explosion, poses a huge corporate image threat. Thereby, Samsung had made a global recall of 2.5 million Note 7 phones due to battery problems (Wiggers 2017). As Samsung Company announced the global recall, the incident raised concerns among stakeholders about Samsung’s practices and product quality (Dejene 2017, p. 6). Through the study of Samsung Note 7 explosion, this case study analysed how the brand integrated two important crisis communication theories, Situational Crisis Communication Theory (SCCT) and Image Restoration Theory (IRT). Therefore, this study aims to find out whether or not the public sentiment about Samsung crisis management on social media and the effort done by Samsung during the Samsung Galaxy Note 7 crisis. An online survey has been chosen to distribute to publics in the Klang Valley. The survey collected 185 respondent; 94 male and 91 female among aged 21 – 31. The result had concluded that Generation Y has not affected by Samsung Note 7 explosion. This can be explained Samsung’s reputation has not been affected. Thus, stakeholders have been forgiving Samsung and are willing to buy Samsung’s products in the future. Additionally, Generation Y has accepted Samsung company crisis management strategy. It has been concluded that Generation Y are agreeing Samsung actions shows that the company has taken the full responsibility and immediately resolve the crisis. The company has done the right thing by implementing product recall procedures to correct their mistakes. Furthermore, future study should focus more on the involvement of the public with regards to a crisis in order to provide a profound framework. This framework can be used by organization, college students and educator have well understanding on crisis management.

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Samsung Crisis Management

Discuss the importance and role of crisis and crisis management in international business firms. Describe and compare any 2 or 3 of the 4 Crisis Management Frameworks/Cycles and apply one of them to the Samsung Galaxy Note 7 Crisis.

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Samsung Note 7 Failure Case Study

Introduction, conclusions.

In August 2016, several Samsung Galaxy Note 7 Smartphones were reported to explode. The manufacturer called upon its engineers hurriedly to diagnose the source of the problem. The initial report pointed to a fault in batteries procured from one of the suppliers. This led to a recall of these smartphones and continued shipping of the same mobile device with batteries from a different supplier [1]. However, the issue surfaced again with reports of the new replacements also exploding, prompting the company to halt the entire Samsung Galaxy Note 7 production. The failure, subsequent recall, and the complete halt of the Galaxy Note 7 production have had social and legal ramifications.

This Samsung Galaxy Note 7 Failure case study aims to analyze the issue, its history, and the aftermath, including the crisis management and the discovered reasons behind the battery explosion.

Smartphones have very advanced computing capabilities, such as high-definition cameras, media players, sensors, GPS navigation units, accelerometers, and gyroscopes, among other features. For most Smartphones, an Android operating system is used. The features need to be supported by stable memory, batteries with the correct power output, an efficient power system, and a good shell to operate efficiently. The risk of failure of Smartphones is mainly in the memory access violation and mobile phone hardware such as the batteries and the shell [2]. Overall, studies on the failure of Smartphones have pointed to two major types of failures, i.e., accidental or malfunction of the software or Android. For this report, the focus is on the hardware or software malfunction.

Samsung Galaxy Note 7 Failure

The explosion of the Samsung Galaxy Note 7 resulted in the recall of the phones [1]. The phones that were overheating were analyzed to establish the causes of the explosion. The techniques employed for the analysis were Failure Mode and Effect Analysis (FMEA). This entails a critical analysis of the entire lifecycle of a product. It analyzes the specifications of the design, operation, and maintenance by establishing the system functions, identification of the failure modes in the system, and functions which then determine the effects and possible causes [3]. The analysis covers both the software and hardware functionalities.

The FMEA is used by engineers in the design stages of a product or post-analysis in the case of issues arising. The initial FMEA conducted after the failure was hardware FMEA. This is a straightforward analysis guided by the understanding that mechanical, electronic, and electrical failures happen due to some issues, such as unanticipated stress, overload, and faulty wiring. The analysis by the engineers concluded that lithium-ion batteries from one of the suppliers had a fault. Part of the battery’s inside was coiled incorrectly, causing stress to the battery.

By performing critical risk analysis, the possible malfunction of software or hardware can be established before the product is launched into the market. The critical failure modes can be ascertained by calculating the Risk Priority Numbers (RPN) through brainstorming [2]. This helps to establish the potential areas of failure and the possible degree of damage. As a result, mitigation measures are taken before the product is released to ensure that the risk is contained.

It is thus paramount that Samsung should have carried out a thorough risk analysis for all the hardware and software from the suppliers before launching the product. Also, after the recall, the analysis was hurriedly carried out; hence, the conclusion that the failure was from a battery procured from a particular manufacturer was theorized rather than being scientifically proven with quantifiable data.

FMEA Process.

Discussion on Samsung Note 7 Failure

The failure of Samsung’s Galaxy Note 7 has had enormous financial implications. It is estimated that it may lead to a revenue loss of over $ 5 billion. Even though the company could easily deal with the loss of income, the failure has great social and legal ramifications. For instance, the failure has already attracted class-action lawsuits against the company, which touch on how the recall and replacement were carried out.

Also, there is a high likelihood of lawsuits that relate to the damages and injuries caused by the explosions. These lawsuits will affect the consumer perception of Samsung’s Smartphones. For example, the Google search for ‘Samsung Explosion’ spiked in August and September despite the recall being only for Galaxy Note 7. The failure has also had social implications for Samsung phone users. Some airlines in the U.S. do not allow passengers to use any Samsung phone onboard their planes.

The failure of any product leads to unintended consequences for the manufacturer and the consumers. Even though investigations are still ongoing to establish the exact cause of the Samsung Note 7 explosions, Samsung’s engineers need to give more care to the materials used to develop the software and hardware of its Smartphones. Also, there should be a critical risk analysis in which an RPN for each possible failure mode is calculated before a product is released to the market. This will ensure that parameters with high-risk factors are properly investigated, and risk reduction measures are taken in advance.

  • B. Chen and C. Sang-Hun, “Why Samsung Abandoned Its Galaxy Note 7 Flagship Phone”, The New YorK Times, 2016.
  • K. Krishnakanth and P. Kavipriya, “Android application development for environment monitoring using Smartphones”, International journal of Mobile Network Communications & Telematics, vol . 3, no. 3, pp. 41-45, 2013.
  • S. Malek, R. Roshandel, D. Kilgore and I. Elhag, “Improving the reliability of mobile software systems through continuous analysis and proactive reconfiguration,” Proceedings of the 31st International Conference on Software Engineering-Companion Volume. ICSE-Companion 2009. Vancouver, BC, Canada, pp. 275-278, 2009.
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IvyPanda. (2023, October 29). Samsung Note 7 Failure Case Study. https://ivypanda.com/essays/failure-analysis-samsung-galaxy-note-7/

"Samsung Note 7 Failure Case Study." IvyPanda , 29 Oct. 2023, ivypanda.com/essays/failure-analysis-samsung-galaxy-note-7/.

IvyPanda . (2023) 'Samsung Note 7 Failure Case Study'. 29 October.

IvyPanda . 2023. "Samsung Note 7 Failure Case Study." October 29, 2023. https://ivypanda.com/essays/failure-analysis-samsung-galaxy-note-7/.

1. IvyPanda . "Samsung Note 7 Failure Case Study." October 29, 2023. https://ivypanda.com/essays/failure-analysis-samsung-galaxy-note-7/.

Bibliography

IvyPanda . "Samsung Note 7 Failure Case Study." October 29, 2023. https://ivypanda.com/essays/failure-analysis-samsung-galaxy-note-7/.

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IMAGES

  1. Samsung Note 7 Crisis Management by Leila Jaffuel

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  2. Remarkable Recovery: Samsung Crisis Management Case Study

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  3. Samsung Crisis Management Presentation

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  4. Crisis and Disaster Management

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  5. (PDF) SAMSUNG MANAGEMENT CASE STUDY

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  6. Samsung Crisis Audit by Emily Wheeler

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VIDEO

  1. Samsung Innovation Campus

  2. Principles Of Management

COMMENTS

  1. Remarkable Recovery: Samsung Crisis Management Case Study

    In this blog post, we delve into a Samsung crisis management case study to learn about exploding batteries to the intricate strategies employed to restore trust. Samsung's journey offers valuable insights into the intricacies of crisis management in the digital age.

  2. Crisis recovery case study: Samsung 18 months on from the explosive S7 Note

    Crisis recovery case study: Samsung 18 months on from the explosive S7 Note Published: 16 February 2018 In August 2016 the Samsung faced what was possibly the biggest crisis of its corporate history. In this article Robert McAllister looks at the causes of the incident, how Samsung reacted and the lessons that can be learned.

  3. (PDF) SAMSUNG MANAGEMENT CASE STUDY

    PDF | On Apr 19, 2020, Ahmed Gadalla published SAMSUNG MANAGEMENT CASE STUDY | Find, read and cite all the research you need on ResearchGate. ... Crisis. Chen. Brian X. (2016). Samsung, Stung by ...

  4. Social Media Usage in Crisis Communication: a Case Study of Samsung

    This study is also set out to observe one company in one crisis event as a case study. The company is Samsung Group, a multinational conglomerate company, and the crisis event is its most recent Galaxy Note 7 recall crisis. The Samsung Galaxy Note 7 (Note7) was launched in August 2016 by Samsung Group (James, 2017).

  5. Crisis PR Study on Samsung Galaxy Note 7 Explosion Incident

    Crisis PR Study on Samsung Galaxy Note 7 Explosion Incident CC BY 4.0 Authors: Wenjing Zhang Abstract Today's business environment is much more complicated than ever before, and only the...

  6. Samsung's crisis communication response: Ineffective response

    Through an in-depth analysis of Samsung's traditional media newspaper apology ads and press statements, coupled with audience comments about the brand on YouTube, this case study analyzes how the brand incorporated two prominent theories of crisis communication, Situational Crisis Communication Theory (SCCT) and Image Restoration Theory (IRT).

  7. Crisis Communication and Management: Lessons from the 2016 Samsung

    The essay torchlights the genesis of the crisis using the framework of the three stages of crisis management -pre-crisis, crisis, post-crisis— (Combs 2015), the tech giant company's...

  8. Samsung: A Lesson in Customer Experience and Crisis Management

    2. Assistive selling. Samsung practices assistive selling as a way to engage customers. While digital sales are very popular, Samsung observed that 75% of their customer base prefers to shop in a physical store, correlating with the fact that 85% of their sales still occurred through in-store purchases.

  9. Social Media Usage in Crisis Communication: a Case Study of Samsung

    Studies in public relations have revealed the importance of crisis communication in corporate image/reputation management. Public relations researchers and practitioners have also suggested the best practice of using both traditional channels such as press conferences, and social media platforms to respond to different crises. This thesis first reviews theories of crisis stage, crisis ...

  10. Why Samsung's Note 7 Crisis Won't Hurt Its Brand Long Term

    October 26, 2016. Things look rather bleak for Samsung at the moment. Within weeks of launching its flagship smartphone, the Galaxy Note 7, the company had to recall all of the more than 3 million ...

  11. How Did Samsung Overcome the Galaxy Note 7 Crisis?

    How Did Samsung Deal With the Crisis? Setting an example for all brands, Samsung dealt with the crisis rather impressively. We break it down below. 1. They showed accountability Samsung was quick to acknowledge problems with the Galaxy Note 7 models. They did not shirk the responsibility when the Galaxy Note 7 crisis ensued.

  12. Samsung Galaxy Note 7: Crisis Management and Beyond

    Abstract Samsung, the world's leading Smartphone maker, launched its most awaited Galaxy Note 7 smartphones in 10 major markets, including the US and South Korea, in August 2016. Within a week of its launch, there were incidents of Note 7s catching fire. Koh, the president of Samsung's mobile business announced a recall and replacement of Note 7.

  13. Samsung, Shame, and Corporate Atonement

    The winner of South Korea's presidential election, Moon Jae-in, is coming to power in the wake of a corruption scandal that ousted President Park Geun-hye. Her impeachment followed the arrest of ...

  14. The Best Crisis Management Examples

    Managing Work Strategic planning The Most Useful Crisis Management Examples: The Good, Bad, and Ugly Try Smartsheet for Free By Andy Marker | August 19, 2020 Review crisis management examples to learn from others' experiences with this comprehensive collection of case studies.

  15. Samsung's crisis communication response: Ineffective response

    Through a study of Samsung's traditional crisis response, a newspaper apology advertisement and three website press statements, this case study uncovers which strategies of SCCT and IRT were practiced. Specifically, this research study highlights image restoration strategies such as corrective action, mortification, and minimization.

  16. How Samsung Handled "Note 7" Crisis: Lessons for Marketers

    One such case is the crisis faced by Samsung, a renowned global electronics company. This academic paper sheds light on the crisis that unfolded within Samsung and explores the...

  17. Samsung Galaxy Note 7: Crisis Management and Beyond

    Samsung Galaxy Note 7: Crisis Management and Beyond | Business Strategy | Short Case Studies Search for Cases Case Code: CLBS155 Case Length: 05 Pages Period: 2016 Pub Date: 2017 Teaching Note: Available Subject : Business Strategy Price: Rs.100 Organization :Samsung Electronics Industry : Smartphone Industry Countries : USA

  18. Risk Management Issues of Samsung Note 7 Case Study

    This case study has been conducted for learning purposes in terms of the possible issues in risk management related to Samsung Galaxy Note 7 fiasco. Samsung's leaderships in particular are being scrutinized for their mishandling throughout the process.

  19. PDF Crisis PR Study on Samsung Galaxy Note 7 Explosion Incident

    Based on crisis management, this essay tries to provide a close look at crisis PR in business world by conducting a case study on Samsung's explosion incident,in the hope of getting some ...

  20. Apple Versus Samsung Patent Lawsuit: an Issue and Crisis Management

    The discussion of the case will be surrounded on the two (2) clusters on the crisis management part, which include crisis event management and post-crisis management. The review of the case showed that Apple had won the lawsuit warfare and Samsung need to pay for the financial loss as a result of copying the design of the Apple's product.

  21. The Crisis Management of the Samsung Note 7 Explosion: a Study ...

    This study is about "The crisis management of the Samsung Note 7 Explosion: A study based on public perception. The study was carried out because the latest smartphone product, the Samsung Note 7 explosion, poses a huge corporate image threat. Thereby, Samsung had made a global recall of 2.5 million Note 7 phones due to battery problems (Wiggers 2017).

  22. Role and Importance of Crisis Management in International Firms

    The report also includes a case study of Samsung Galaxy Note 7 and its crisis management plan. Samsung Crisis Management. Discuss the importance and role of crisis and crisis management in international business firms. Describe and compare any 2 or 3 of the 4 Crisis Management Frameworks/Cycles and apply one of them to the Samsung Galaxy Note 7 ...

  23. Samsung Note 7 Failure Case Study

    Discussion on Samsung Note 7 Failure. The failure of Samsung's Galaxy Note 7 has had enormous financial implications. It is estimated that it may lead to a revenue loss of over $ 5 billion. Even though the company could easily deal with the loss of income, the failure has great social and legal ramifications.