No company would ever want to go through the pain and loss of having to recall its flagship product on the best of days but when something like this happens at a time the company is already under pressure, it just makes it so much harder to steer the organization through it all. That’s really what happened with Samsung, the Galaxy Note 7 fiasco couldn’t have come at a worse time for the Korean giant.
Investors in South Korea were already calling on the company to change its complicated corporate structure. Critics say the company has to change its top-down “militaristic” culture to be able to compete in the future. It’s now having to fend off a challenge by activist investor hedge fund Elliott Associates which has proposed that Samsung Electronics should be split into two.
Samsung also has a reputation to protect in its home country. People in South Korea often refer to their country as the “Republic of Samsung” because the conglomerate is in just about every business, its business interests range from bakeries to ship-building and everything in between.
“You can live your entire life here from cradle to the grave on Samsung products,” says Geoffrey Cain, an author and journalist who will soon launch a book on Samsung and its businesses, “You can die [and] go to the Samsung morgue when you’re dead. You can get married at the Samsung wedding hall in the company.”
The Galaxy Note 7 recall has the entire nation worried. Samsung’s business interests make up for 20 percent of Korea’s gross domestic product and the country’s central bank has already indicated that the cancellation of the flagship is going to have an impact on the overall economic outlook.
Many customers in the country have their patriotism tied up with Samsung and they take pride in using the company’s products. However, the fact that it has still not been able to disclose what caused the Galaxy Note 7 to catch fire is seriously hurting its reputation in the country. Elena Yang, one such loyal Samsung user, says that she’s frustrated by the company’s response. “They haven’t [told] us what the complete problem is or how they solve this problem step by step. They didn’t tell us very concretely,” she said.
Samsung has reiterated multiple times now that it’s going to get to the bottom of this and disclose the reasons but it’s unclear when we’ll get a proper explanation from the company. Till that happens, it runs the risk of further damaging its reputation in a market where it has virtually operated with impunity for decades.