Case Study: Risk Management and Samsung Galaxy Note 7 Recall Analysis

This report provides an in-depth analysis of the Samsung Galaxy Note 7 recall, examining the risk management failures that led to the crisis. The report begins with an executive summary outlining the key issues, including the faulty battery design and the subsequent recall of millions of devices. It delves into the case study, detailing the events surrounding the product launch, the initial reports of overheating and fires, and Samsung's response, including the recall and investigation. The report explores the technical issues, such as the battery manufacturing defects from two different suppliers, and Samsung's efforts to understand and address the problem, including the creation of a test lab and the implementation of a new safety strategy. The analysis covers the impact on Samsung's reputation, financial losses, and the importance of transparent communication. The report offers recommendations for companies facing similar situations, emphasizing honesty and robust risk management protocols to mitigate potential damage. The study concludes with a discussion on the economic impact, brand value and the measures taken by Samsung to recover from the crisis.

Running head: MANAGEMENT ACCOUNTING
Management Accounting
Name of the Student:
Name of the University:
Author Note

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Executive Summary
The issue that has been presented in the question revolves around the particular fact in
regards to the risk management strategies that had been adopted by the management of Samsung
when it had decided to recall its product due to the fact that it was catching fire.
Samsung had launched the Galaxy Note 7 and it had been reported that there had been a
huge volume of preordered records. However, the electronic giants had to initiate a recall in the
month of September 2017. The first version of Note 7 had been called back and the further
production of Galaxy Note & had been halted. By the month of October, the company had to
recall 2 million devices. It had been estimated that the recall of the product would cost the
company an amount of $5.3 billion. This had been followed by incidents in which the
management of the company had suffered loss not just in terms of monetary unit but also in
terms of goodwill and trust among its loyal customers. This particular study aims to provide the
required recommendations like a company facing the similar situation should be brutally honest
with its policies and practices with the public.

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Table of Contents
Introduction......................................................................................................................................3
Case study........................................................................................................................................4
Samsung creates a test lab for experimenting the technical manufacturing faults in Galaxy 7
Issues............................................................................................................................................6
Smoking phones were caused due to battery manufacturing defect............................................7
Samsung recreates the battery advisory group and go for designing the 8-Point safety strategy7
Recommendation.............................................................................................................................9

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Introduction
The issue that has been presented in the question is that the management team of the firm
has been proposed to develop a manual in order to train the staff in regards to the major areas of
risk so that the company can avoid the occurrence of similar incidents. The particular incident
that has been chosen for the purpose of this study is Samsung Galaxy Note 7 recall. It must be
noted here that the running of a particular business can come up with a number of risks. The
level of the risks being can be measured with the particular impacts that they have on the overall
functioning of the firm (Carnevale, Loureiro and Kabadayi 2018).
This particular study aims to understand the incidents that led to the downfall of the
selected Samsung product. Moreover, the particular methods that had been utilized by the
management of the firm to avert the disadvantages of the situation have also been discussed in
this particular study. The risk management issues that have been utilized by the particular
corporate entity of Samsung have been analyzed and evaluated in this particular paper
(Carnevale, Loureiro and Kabadayi 2018).
The management of Samsung had undertaken a global recall of the Galaxy Note 7 smart
phone and after seven months of silence, the management of the global entity revealed the fact
that the particular reason behind the device’s batteries to overheat and catch fire. The particular
reason had been that the battery of the device had been faulty as they have been sourced from
two different suppliers. The batteries that had been sourced by Amperex Technology Limited
were missing insulation tape and a certain number of batteries consisted of sharp protrusions
inside the battery that damaged the separator between anode and cathode. Therefore, this
particular study aims to provide an overview into the risks to which the business firms might be

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exposed to. In case of Samsung, the particular risks to which the global electronic giant is
exposed to are the risk due to improper quality management techniques, risk of losing reputation
and financial risk due to failure of the product.
Moreover, this particular study aims to provide an overview into the management
strategies that might be employed by the management of a corporate entity facing the similar
issues as Samsung.
Case study
It had not been four months, post the launch of which the conglomerate Samsung had
recalled its much-acclaimed product, the Galaxy Note 7 phone. This is because there had been
numerous instances of the phone catching fire.
Samsung had launched the Galaxy Note 7 and it had been reported that there had been a
huge volume of preordered records. However, the electronic giants had to initiate a recall in the
month of September 2017. The first version of Note 7 had been called back and the further
production of Galaxy Note & had been halted. By the month of October the company had to
recall 2 million devices. It had been estimated that the recall of the product will cost the company
an amount of $5.3 billion.
It must be noted here that the recalling of a product is not easy. The yielding of the
returns in regards to more than 30 percent is extremely challenging. It had been further stated by
the management of the corporate entity that it had targeted a 100% recall of the product. Post this
statement, the global entity had been reported to achieve a 96 percent return rate globally.

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The CEO of Samsung Tim Baxter and the CEO along with the president of the globally
acknowledged company Samsung Electronics America, Inc calls for one of the latest recalls for
first digital. The company sets upon the mechanism of text messages and communication
through emails and recalling mechanism. Samsung worked upon the improvement of the speed
and the volume of the units to be returned by working along with the telecom carriers and the
critical complication in the field of up gradation of software. The update could easily disable the
charging abilities of the Samsung Galaxy Note 7 and ultimately rendering it as a completely
useless phone that has been introduced in the electronic industry. Since the condition was a
recalling for the safety issue, the involved service provider completely agrees to make equal
distribution of the various updates that considers the elemental requirement of such a situation
where there is diminishing condition of device charging. This condition was rediscovered when
(DOT) Department of Transportation thought of banning the model Note 7 on flights. The whole
team of the employees working in Samsung moved for airports for helping upon the consumers
and collecting their phones (Park caes et al., 2017).
The president of Mobile Communication Business for Samsung Electronics, DJ Koh has
tried to analyze that the concept of technological innovation is very important for a brand name
like Samsung. However, at the same time he has specifically declared that for them customer
safety is much more important to them. The president also stated that the multinational
acknowledged company is much known as a reinstate brand. It is clearly stated by him to gain
back the trust again, Samsung needs to identify the various complications and go for identifying
the root cause of critical complain regarding the manufacturing controversy. The technical
malfunctioning is the root cause of the initiation of product verification among the customer
base. The sector had to devote time in learning the strategies and the fundamentals to facilitate

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further designing of the products. Samsung has clearly announced in a press conference in Korea
that they are really thinking of taking strict actions against the complications faced by their users.
They are going on researching the probable remedies that can control the situation to some
extent. It has declared that the company would go for long technical investigations into finding
the real reasons behind the complication that Samsung Galaxy 7 faced on being introduced to the
market (Park caes et al., 2017).
Samsung creates a test lab for experimenting the technical manufacturing faults in Galaxy
7 Issues
The last 120 days, Samsung has been successful in building the new laboratory. The lab
was essentially staffed with more than 700 researchers and over 200,000 devices to work upon
and at the same time supplied with 30,000 batteries for evaluating the technical fault and the real
cause behind the fire. Such an attempt was introduced to make out the causes of such
complication. It was finally tested and found out that the whole mechanism involved in the
device included such a weird combination of manufacturing that created wireless charging quite
faster than normal charging. It was also tested in the context of water resistance and it working
even without device the back cover (Tuttle 2016).
Samsung even tested the some of the other devices that features along with it USB
chargers and even with the Iris Scanners. It also evaluates the algorithmic and the software
updating elements that are completely tied up with the technology of Wireless charging. It was
also involved in evaluating the introduction to the strategies of third party application that was
actually impacting the working of the phone. Additionally it was based upon the working of the

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laboratory test reports that were introduced and analyzed by the third party concern namely,
Exponent, UL, TUV Rheinland that continued with it evaluating process and assess the software
issues that were tuff in handling the logistic issues , hardware manufacturing and handling. The
same logistics of results were evaluated in various kinds of individual labs that go for revealing
the same result (Tuttle 2016).
Smoking phones were caused due to battery manufacturing defect
The batteries from two different manufacturing places have major flaw unit production.
The main principal cause is the first manufacturer problem of battery in (Battery A) and the
negative deflections of electrode. The second dysfunctional problem is that the Battery B
suffered vigorously from the critical abnormal wielding Burrs through ultrasound. The principal
account was considered to be different in accordance to each of the battery type. But he result
that was achieved was almost same. The main point of concentration was that the batteries could
easily get heated and has immense chances of getting heated and catching fire any moment. Thus
it was clearly defined that the introduction of smart phones in industry for the desire for
supporting the technology of thinner phones with much longer life and has strained upon the
processes of manufacturing (Lin, Dahl and Argo 2017).
Therefore, it had been found out that the brand value of Samsung suffered a huge loss for
the faulty product that it had distributed in the market. Moreover, the first approach that had been
maintained by the management of the company had been that they had been replacing the
damaged Note 7 with new products that had in turn started to blow up. This did not the corporate
giant to halt the distribution of the products in the market but rater continued the invitation of
Note 7 owners to come up with their particular model of the product and exchange with one of
the replacement devices that were certainly, in all probabilities safe (Lin, Dahl and Argo 2017).

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Several tech analysts are of the opinion that the recall of the tech products is not
something that is uncommon but the particular strategy followed by the corporate entity of
Samsung has been completely different. The difference lies in the fact that the vendors had
resolved the particular recalls that have been carried out by the different entities while in the case
of Samsung the recall has been a major issue.
The primary reason as cited by the different experts for the downfall of the corporate
giant had been lack of assurance of the quality of the product. It had been further mentioned in
the published reports that Samsung had not successfully executed the quality assurance tests and
other related tests for the purpose of ensuring the fact that the products possessed the minimum
degree of quality. Therefore, the experts had been of the final opinion that this particular incident
was like to affect the brand and the goodwill of the firm. The economic impact of the incident
had been estimated to be in the range of $10 billion to $14 billion (Lin, Dahl and Argo 2017).
Recommendation and Conclusion
Samsung recreates the battery advisory group and go for designing the 8-Point
safety strategy
The company is into making a potential battery advisory association that keenly involves
in accumulating the research materials from different leaders working from about various parts
of the country. The leader consists of laureates belonging to different universities and some of
the listed and specified consultancies. The Battery Advisory association includes the eminent
personalities namely Clare Grey, an expert advisor in the subject of Chemistry from University
of Cambridgeshire. Gerbrand Cedar, an eminent lecturer in the subject of Materialistic Science
and Engineering and Toru Arnazutsumi, who is known to be the CEO of Armaz Techno.

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On going forward with the notifications, it must be specified that the quality assurance of
the organization means a lot and the below mentioned components must be followed by the
manufacturers. It is strictly implemented by the multi-layer safety measures that is considered to
be a protocol at the planning of the available product and the 8 Point new battery mechanism that
strongly maintains the specification that are required for maintaining such abrupt condition.
Lessons learned from the particular incident and prevention tests
The prevention tests that needs to be conducted are as follows:
 Durability Test- The situation of the additional durability test includes the nailing of the
battery, testing of stress with temperature and at the same time overcharging the required
test.
 Inspection that is visual in nature – the battery should be checked visually in order to
compare it along with the samples so that it can be ensured that the battery is of standard
quality
 X-ray test – the running of the X-ray test should be carried out in order to identify any
kind of battery issue
 Charge and discharge test – the charge and discharge test should also be carried out in
order to ensure the fact that all the devices run without any fault as had been the case
with Note 7.
 Accelerated usage test – the accelerated usage test has been carried out in order to test
the product from the perspective of a customer
The particular recommendation that is applicable for the corporate entity had been that
Samsung should have been honest about the proceedings that it has been carrying out in the

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market. This means that the single incident of the phones catching fire should have been easily
resolved by the company by letting out the word in the market that the electronic giant had been
executing a product recall. However, instead of terming the process as product recall Samsung
did start the procedure as an “exchange program”. This was the first error that had been carried
out by the corporate entity. The particular recommendation in such a case is that a company in
case of facing issues Like Samsung should be brutally honest with the public and should the state
of the matters as it is.
Moreover, when the management of Samsung had decided the fact that the production of
further galaxy Note 7 would be halted the, it did not cite the real reasons for such a decision to
the media or the public. Moreover the particular statement that the company had sent out was
that the plan of halting the production was due to the adjustment in the product schedules. This
was another major blunder, which was committed by the management of the company. This
decision mot only resulted in the loss of goodwill by the company but also carried out the
potential breach of trust of its potential customers. The particular recommendation in such a
situation is that any corporate entity facing the similar kind of issue should be totally open along
with the outside world and should take full responsibility for the fault in the product. This can be
further evidenced by the fact that the loss of goodwill that Samsung had suffered was solely due
to the bad management decisions that the firm had taken. Had it been completely honest of its
commitments and took full responsibility of the product incidents then there would be a chance
of not losing its acquired goodwill. This is because the public or the global brand’s loyal base of
customers would consider the company on account of a mistake. But the single fact that the
company in spite of knowing that they had been manufacturing faulty phones did not inform the

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world about the real issue which resulted in the firm losing their hard earned reputation and
goodwill.
Therefore, the particular recommendation in case of the business firms facing the similar
kind of issue is that the quality check framework should be constructed in such a way that the
faults that may have been included in the manufacture of the product should be properly
identified and the chance of mitigating the issue can be optimally utilized.

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References and Bibliography
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Products: The Role of Brand Trust and Trusting Beliefs. Journal of Creating Value,
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Signal Processing (ICASSP), 2016 IEEE International Conference on (pp. 1816-1820). IEEE.
Lan, W., Qiu, S., He, H. and Xu, W., 2017. A continuously growing dataset of sentential
paraphrases. arXiv preprint arXiv:1708.00391.
Lin, L., Dahl, D.W. and Argo, J.J., 2017. Refining the tightness and looseness framework with a
consumer lens. Journal of Consumer Psychology, 27(3), pp.392-397.
Park, J., Kim, K., Yeo, H., Lee, J.H., Chung, J., Choi, D. and Lee, M., Samsung Electronics Co.,
Ltd., 2017. Mobile phone. U.S. Patent D786,848.
Park, S. and Shin, D., 2015, January. Effects of text input system on learner's memory:
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Stephan, K., 2017. Exploding Galaxies: How to do recalls right. IEEE Consumer Electronics
Magazine, 6(2), pp.99-100.
Tuttle, H., 2016. Samsung's vertical integration challenge. Risk Management, 63(10), p.6.

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Zhu, A.Y., von Zedtwitz, M. and Assimakopoulos, D.G., 2018. Implications and
Recommendations. In Responsible Product Innovation (pp. 119-133). Springer, Cham.
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