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OM in the News: Samsung’s Fatal Flaw

October 25, 2016
The Galaxy Note 7 Smartphone after it caught fire

The Galaxy Note 7 Smartphone after it caught fire

“Big product recalls are never easy,” writes The Wall Street Journal (Oct. 24, 2016). In 1982, Johnson & Johnson recalled 31 millions of bottles within days of 7 people dying from cyanide-laced Tylenol. (J&J spent more than $100 million on the recall and product relaunch and was widely praised for its response). In 2009, Toyota recalled more than 8 million cars worldwide because of a faulty accelerator pedal, costing over $3 billion.  And in 2015, 70 million Takata airbags were recalled in the U.S. alone. Consumers, however, are often willing to forgive mistakes if they believe the company is looking out for them and moving swiftly to address problems.

But, as the Journal‘s article “Samsung Recall’s Fatal Flaw” concludes, a rushed conclusion, based on incomplete evidence, forced the company to kill the Galaxy Note 7. A laboratory report last month said scans of some faulty devices showed a protrusion in Note 7 batteries supplied by Samsung SDI , a company affiliate, while phones with batteries from another supplier (Amperex) didn’t. It wasn’t a definitive answer, and there was no explanation for the bulges. But with consumers complaining and telecom operators demanding answers, the company felt it knew enough to recall 2.5 million phones. That decision in early September—to push a sweeping recall based on what turned out to be incomplete evidence—is now coming back to haunt the company.

Two weeks after Samsung began handing out millions of new phones, with batteries from the other supplier, the company was forced to acknowledge that its initial diagnosis was incorrect, following a spate of new incidents, some involving supposedly safe replacement devices. Worse, in China, where the company used only Amperex-supplied batteries in its Note 7s, the company dismissed reported smartphone fires as fabrications, arguing it was impossible for those batteries to have caused problems. Now, with U.S. regulators raising fresh questions, Samsung took the drastic step of killing the phone outright.

Classroom discussion questions:

  1. What could Samsung have done differently?
  2. Compare this recall with the 3 mentioned earlier.

 

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