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Management/Operations Case Analysis
My greatest issue of concern refers to the failing batteries on a flagship phone. Even though only a minimal number of phones have been reported to have the problem, good performance of this product was undoubtedly expected to be a milestone development for the company. Samsung has in the recent past launched many phones and shown its determination to provide its consumers with innovative products. This trend has been disrupted by the issue of the exploding batteries. For a company that is as big as Samsung, the image it creates in the market is extremely important. It determines whether the consumers will continue trusting the companys products or not. Considering the fact that the company offers more than just mobile phones, the slightest deterioration of image can result in major losses. Regarding the battery issue, some prospective consumers may avoid purchasing the companys products. Explosion of batteries is a question of safety, and it is likely that most consumers would consider it a priority when determining the brand of phone they will purchase. This must be a major issue of concern for Samsung. It should also be appreciated that the company is competing against fierce rivals like Apple. In fact, the affected phone, Galaxy Note 7, was meant to counter the competition that will be presented by Apples launching of yet another iPhone. In this situation, the battery issue is a major drawback of Samsung in its effort to deal with the competitiveness of Apples products and those of other companies. Lastly, the replacement of the phones that have been recalled will be a major undertaking that will undoubtedly cost the company a lot. This may destabilize the companys budget for the year considering that it is the act of emergency.
The number of phones recalled is 2.5 million. While this may appear as a small number compared to the amount of phones sold by the company in any given period, it should not be overlooked that recalling involves undoing what had already been done. Collection of the phones from the customers back to the companys production system is undoubtedly laborious. Moreover, it will be done at a time when employees and other participants of the distribution chain should be producing and distributing new phones to customers. The fact that 10 countries will be affected by the recall is also worrying. The process that involves 10 countries can be termed extensive, and it may considerably affect the companys image in these countries. Most enterprises in the contemporary business world are seeking to expand into the international market, and it is unfortunate that Samsung is instead experiencing a setback in the same market.
The company is certainly facing a critical state. This situation is even more worsened because customers are involved making it harder to subsequently design and manage the operations in the phone replacement. This difficulty emanates from the fact that the customers will have high expectations for the replacements in terms of possible flaws whether relating to the batteries or any other aspect. The company may also be facing a major difficulty in processing the replacements if the production systems are specifically standardized; this is most likely the case. Whereas there is no need to discard all parts of the affected phones, trying to manufacture batteries alone may cause a major disruption in production. Lastly, the company may face significant challenges in terms of the value of its products in future. Having encountered or learnt of the battery flaw, many customers may no longer be willing to pay more for the companys products. This is an serious concern considering the stiff competition currently characterizing the market for mobile devices.
Following the widely publicized recall, prospective customers may respond by avoiding buying the companys products due to the affected ones. This may be caused by the loss of trust in the companys products and the fact that there are other cheaper brands though they are not of such high quality as Samsungs products. Reduced demand will in turn mean reduced sales, and this may adversely affect the companys revenue and profits. The company may also be forced to reduce the pricing of its mobile devices in an effort to recapture the market that will have been lost.
To handle the situation effectively, communication to the companys consumers will be the key. Here, it is important to note that a companys reputation is an issue of the perception of the stakeholders. However, their attitude does not necessarily have to be the reality. As such, since only a small proportion of the companys products were affected, there is a need to explain to the consumers what has happened (Eccles, Newquist, & Schatz, 2007). It is crucial to reassure the customers that the flaw did not affect the entire production system, and as such, other products of the company will not have the same problem. Therefore, it may be essential for the company to give details of the measures it has applied to correct the flaw. All this will be aimed at influencing the stakeholders perception to the companys favor. Nevertheless, the company should exercise caution not to engage in short-term manipulations because such actions may result in a worse reputational damage in the future. Moreover, it is crucially important that the company ensures that there is cohesiveness and coordination in the way it responds to the crisis across all participants in the distribution chain (Eccles, Newquist, & Schatz, 2007). The situation would certainly worsen if customers start getting contradicting information regarding the recall and the companys response.