Introduction
Samsung is one of the leading handset manufacturers and is renowned for its cutting-edge technologies. In 2016, the company went into trouble over a battery safety concern and experienced financial and reputational damage. On August 2, 2016, Samsung introduced its latest top device, the Galaxy Note 7. A South Korean user reported the Galaxy Note 7 exploding on August 24, just a few nights after the phone’s release.
Several customers claimed their gadgets were overheating and crashing shortly after the incident. The following day, Samsung launched the preliminary withdrawal of 2.5 million smartphones due to defective batteries (Heathman, 2017). Therefore, this report aims to determine and evaluate risk management challenges based on the Samsung Galaxy Note 7 suspension altercation. Furthermore, the paper offers a range of suggestions for strengthening Samsung Company’s business risk administration functions that it should pursue to establish its enterprise preparedness abilities.
Identification of Key Issues
First, the smartphone market competitiveness has increased in recent years. Samsung, a market leader, competes with Apple with its Galaxy Note series. In addition, certain new entrants, such as Huawei, are expanding rapidly. Therefore, the competitive threat could be Samsung’s most apparent worry. Secondly, shifting consumer preferences resulting from technological progress pose dangers for Samsung. Samsung is renowned for its innovative technology, and the corporation is compelled to regularly update and improve its expertise due to the ever-shifting preferences of consumers and the intense rivalry in the marketplace.
Notable is the possibility of defective items, and the fundamental attribute of cellphones is their performance. Since Samsung aims to provide superior gadgets and solutions, merchandise quality might be a greater priority for the company. Additionally, Samsung outsources the production of product elements; therefore, third parties’ incompetence could harm Samsung. The technique reduces Samsung’s risk associated with controlling its items’ general effectiveness. In addition, the preceding risks may result in reputational damage, which is inextricably linked to customer loyalty. Consequently, if a company’s reputation is compromised, sales income could be significantly affected.
Lessons Learnt
Recent Note 7 explosions have destroyed Samsung’s reputation for reliability, like a residence of chips on fire. There is no verification as to the precise cause of Samsung’s catastrophe. Initially, the business attributed the incidents on a specific battery cell fault, but it came out that not even Samsung knew the precise cause of the blasts. While it appeared that Samsung was steadily gaining control of the situation, a few more Note 7s burst, but this time the circumstances were distinct. Where did Samsung go awry with the Note 7, and was it too premature to cease smartphone operations? The following conclusions can be inferred from the explosion of Samsung’s Note 7.
There is no Gadget Immune to Explosions
In the past, there have been countless incidents of exploding devices, and while none attracted as much publicity as the Note 7, most were hazardous. In fact, every lithium-ion battery-powered equipment is vulnerable to accidents. One of the explanations why mobile phones became so popular was their long standby duration without taking up much room. Therefore, this was the product of tightly populated batteries, which represented a technological breakthrough and increased the chance of short circuits. Currently, all smartphones are driven by these cells, and although the likelihood of exploding is exceptionally low, even a little design flaw can result in an accident.
Expensive does not Guarantee Safety
The Samsung Galaxy series has traditionally dominated the luxury smartphone product category. After the release of the Galaxy S6 and Galaxy S6 Edge, the handsets have even chipped into Apple’s market share due to their superior build quality. However, this does not imply that they are safer than less expensive devices. These handsets continually push the technological envelope; mainly, battery expertise has not kept pace with the progress of other mobile hardware, so producers are introducing capabilities such as fast charge and high-density packs to meet consumer demands. In contrast, most flagship models showcase the corporation’s newest, least-tested innovation regarding the actual customer experience. Note 7’s context leads to modest safety concessions that could very well end in a catastrophe.
Revised Safety Legislations
The present smartphone safety laws are not as stringent as they should be. Most nations have their regulatory agencies to establish safety processes, but with the explosive rise of smartphone adoption, these restrictions are inadequate for ensuring the gadgets are thoroughly tested. Specific absorption rate (SAR) estimates have proven ineffective in examining real-world impacts and changes, even in the context of mobile radiations. The majority of testing assumes there is no direct skin interaction with the equipment. The Federal Communication Commission (FCC) asserts that any smartphone subjected to routine radiation assessments while in direct proximity to human skin will underperform.
Battery Innovation requires Special Changes
When it comes to smartphone advancement, battery invention is on the rise. Power is essential for all electronic devices, and the most effective method for energy storage was discovered in 1991 (Aykol et al., 2020). Since their conception, the lithium-ion batteries driving people’s smartphones have remained virtually unchanged. Even though the battery sector has increased by 5 to 10% annually, there has been no innovation to maintain the increasing need for power (Aykol et al., 2020). With every smartphone, there is a desire for a more multicore hardware, a larger and more pixel-dense display, and slimmer profiles. The increased processing capacity gives gadgets additional capabilities, but the cells’ breakthrough cannot power these chipsets. Regardless of the smartphone’s cost, most customers are compelled to scrounge for energy at the end of the day.
Recommendations for Enterprise Risk Management (ERM)
Enterprise risk management (ERM) is a technique that takes a tactical view of risk assessment from the standpoint of the whole company or corporation. Saeidi et al. (2019) enumerated that ERM is a top-down methodology that tries to detect, appraise, and plan for prospective losses, threats, liabilities, and other prospects for the destruction that may impede an institution’s activities and aspirations and result in losses. Enterprise resilience is the ability to endure systemic disruptions and prepare for new risk situations.
A resilient firm aligns its approach, processes, operational processes, regulatory regime, and decision-support functionality to identify and adapt to ever-changing risks. In addition, it makes a firm withstand interruptions to its foremost profit drivers and gain competitiveness over less adaptable rivals. Such resilient companies promote transparency and implement rules for executives and boards to manage enterprise-wide risks (Bemthuis et al., 2020). It can survive illegal or dishonest staff behavior, IT equipment breakdowns, disturbances in interconnected supply chains or consumer connections, severe market circumstances across geographies, and many other upheavals businesses confront today (Bemthuis et al., 2020). The following recommendations will assist Samsung in strengthening its corporate risk management to establish resilient business capabilities to avoid a similar issue to the Samsung Galaxy Note 7.
First, Samsung Inc. management should thoroughly evaluate the firm’s competitive plans. As previously indicated, Samsung failed to manage competition risk effectively. The leaders’ erroneous decision to shorten the timeline for engineers and part suppliers led to the battery safety catastrophe. Therefore, some enhancements to the risk administration procedure should be made to ensure that the organization is on the correct course relative to its rivals. Samsung requires an internal risk management committee to assist in assessing the hazard exposure of its initiatives and managerial choices. The group will be able to evaluate all alternative outcomes and spot possible dangers. Then, senior management should be provided with a balanced scorecard that details the business goal, research aim, concerns, and company capabilities. The report can assist managers in identifying hazards and balancing profits and risks. In addition, with adequate risk intelligence, directors can devise strategies for adapting to intense rivalry and gaining a competitive edge.
Second, as a company specializing in luxury handheld devices, the quality problem is crucial. Samsung should, therefore, have a rigorous quality assurance procedure. Even while Samsung has made some attempts to upgrade its energy test system, such as its eight-point battery wellness monitoring program, Samsung still has room for improvement regarding quality assurance. On the one hand, Samsung and its battery provider could communicate more. Samsung might obtain further knowledge about its suppliers’ capabilities, choose vendors and make purchases accordingly. Alternatively, Samsung might create a different risk management group to check product quality based on external reports; examples include customer testimonials; therefore, the organization can quickly recognize. By cooperating with the internal risk control department, Samsung could anticipate quickly identifying the source of the issue. Additionally, the risk administration team could prepare preparations for any product-related concerns. As a result, the plan will facilitate the corporation’s problem resolution.
Last, Samsung should enhance its customer interaction to contain and mitigate the crisis’s impact. Utilizing social media effectively and increasing the disclosure of data could lead to the desired outcome. Since more people are utilizing digital platforms and fewer individuals routinely visit the company portal, most individuals acquire information more quickly through media sites. Samsung is encouraged to utilize these platforms to disseminate vital information effectively. In addition, Samsung should boost its crisis-related informational openness. When experiencing a catastrophe, the organization needs to get the comprehension of its customers. As quickly as feasible, Samsung should inform consumers of its inquiry into the situation to preserve customer trust in its merchandise. Moreover, the enhanced transparency of crisis-related material could demonstrate to clients the business’s favorable view and attempts to defend its brand.
Conclusion
In conclusion, the smartphone market competition has intensified in recent decades. Apple is in rivalry with industry leader Samsung’s Galaxy Note series, and newcomers like Huawei are developing swiftly. Consequently, the competitive pressure may be Samsung’s primary concern. One of the reasons why smartphones became so prominent was their long standby time and small footprint. Therefore, this resulted from densely packed batteries, which represented innovative progress but raised the probability of a short circuit.
Historically, the Samsung Galaxy series has monopolized the premium smartphone industry. In the frame of reference of Note 7, this results in minor safety compromises that could very well result in a disaster. ERM is an approach that adopts a tactical perspective on risk management from the perspective of the entire organization. It is a top-down approach that attempts to detect, evaluate, and strategize for potential losses, dangers, obligations, and other possibilities for a collapse that may inhibit a company’s actions and objectives and generate losses. A resilient strategy will conform Samsung to its methodology, procedures, internal operations, regulatory system, and decision-support capabilities in a manner that enables it to recognize and acclimate to ever-changing risks. In addition, it allows a company to withstand disruptions to its primary profit drivers and gain a competitive advantage over less adaptable competitors.
To solidify its corporate risk management and avoid a circumstance similar to the Samsung Galaxy Note 7, Samsung’s leadership should comprehensively analyze the company’s competitive strategies. As a firm that concentrates on premium portable gadgets, the issue of quality is paramount. Therefore, Samsung should have a stringent quality assurance method. Samsung should improve its user engagement to minimize and reduce the crisis’s effects. Effective use of digital networks and more information transparency could contribute to the intended outcome.
Reference List
Aykol, M., Herring, P. and Anapolsky, A. (2020) ‘Machine learning for continuous innovation in battery technologies.’ Nature Reviews Materials, 5(10), pp.725-727. Web.
Bemthuis, R., Iacob, M.E. and Havinga, P. (2020) ‘A design of the resilient enterprise: A reference architecture for emergent behaviors control.’ Sensors, 20(22), p.1-39. Web.
Heathman, A. (2017). Samsung’s Galaxy Note 7 phones: what was wrong with them? Web.
Lopez, M. (2017). Samsung explains Note 7 battery explosions, and turns crisis into opportunity. Forbes. Web.
Saeidi, et al. (2019) ‘The impact of enterprise risk management on competitive advantage by moderating role of information technology.’ Computer Standards & Interfaces, 63, pp.67-82. Web.