Sam­sung cri­sis vi­o­lates PR rule­book

Kuwait Times - - ANALYSIS - By Juli­ette Michel

The first rule in a cor­po­rate cri­sis is to staunch the bleed­ing. How­ever, PR ex­perts say, Sam­sung Elec­tron­ics bun­gled in not just mis­di­ag­nos­ing the fault af­flict­ing its top-end phones but ap­pear­ing un­com­mu­nica­tive with an aloof bed­side man­ner. As a re­sult, the South Korean com­pany has its work cut out as it em­barks on a vast and costly ex­er­cise to win back trust and prove that it is still a by­word for qual­ity at a time when its ri­vals are go­ing full tilt in the smart­phone wars.

“The ba­sis of cri­sis man­age­ment is to make sure that when you give a so­lu­tion, it’s the right so­lu­tion and it is go­ing to en­able you to move for­ward,” Andy Holdsworth, a cri­sis man­age­ment spe­cial­ist at the Bri­tish PR firm Bell Pot­tinger, told AFP. That has not been the case with Sam­sung. Per­haps re­luc­tant to lose too much ground to ri­vals such as Ap­ple and Google, who were busy launch­ing their own new mod­els, the com­pany rushed out re­place­ments for its Galaxy Note 7 ‘ph­ablet’ se­ries when some in the first global batch spon­ta­neously caught fire.

The in­cen­di­ary prob­lem per­sisted, how­ever, and now Sam­sung has been forced to scrap the en­tire line in an em­bar­rass­ing set­back for a brand im­age that took years to build up. Some air­planes had banned pas­sen­gers from board­ing with the phones. So­cial me­dia is rife with anger and ridicule. One video, of a Burger King em­ployee in South Korea gin­gerly han­dling a smok­ing Note 7 with oven gloves, has gone vi­ral.

Holdsworth said Sam­sung’s re­sponse through­out had been “dis­jointed”. “I would ques­tion the in­ves­ti­ga­tion and I would ques­tion why Sam­sung said last night the prod­uct is safe if this morn­ing (Tues­day) they then de­cide to re­call all units and stop pro­duc­tion. There seems to be a slight mis­com­mu­ni­ca­tion some­where. You kind of lose faith in it be­cause your rem­edy (suf­fered) the same prob­lem and this prob­lem is quite a dan­ger­ous one.”

The fam­ily-run cor­po­ra­tions, or “chae­bol”, which dom­i­nate the South Korean econ­omy are used to run­ning their busi­nesses their own way. As com­pa­nies like Sam­sung and LG have be­come global brands, their cor­po­rate gov­er­nance and PR cul­tures have im­proved as they have adapted to the rig­ors of in­ter­na­tional mar­kets, but an­a­lysts say the old fam­i­lyrun struc­ture, with its rigid top-down de­ci­sion-mak­ing, leaves them vul­ner­a­ble to a cri­sis.

Who’s in Charge?

In Sam­sung’s case a gen­er­a­tional lead­er­ship trans­fer, with fam­ily pa­tri­arch and group chair­man Lee Kun-Hee bedrid­den since suf­fer­ing a heart at­tack in 2014, may have con­trib­uted to the com­pany’s fail­ure to deal ef­fi­ciently with the Note 7 cri­sis. “In chae­bol like Sam­sung, the all-pow­er­ful chair­man makes key de­ci­sions and these are swiftly trans­lated into ac­tions by his un­der­lings,” said Chung Sun-sup, head of cor­po­rate anal­y­sis group Chae­bul.com.

“But if such a pa­tri­ar­chal leader is some­how ab­sent, such a de­ci­sion-mak­ing struc­ture may fall into limbo. The cur­rent cri­sis at Sam­sung is re­lated with this cor­po­rate struc­ture. If Lee was in charge, he might have sorted it out, bring­ing in ev­ery avail­able ex­pert from both in­side and out­side the com­pany. But Sam­sung just tried to tin­ker with the prob­lem and failed,” Chung said.

It could be worse. There has been no loss of life, un­like other PR dis­as­ters such as the 2010 ex­plo­sion at BP’s Deep­wa­ter Hori­zon oil rig which now fea­tures in a Hol­ly­wood movie. And other com­pa­nies have also strug­gled with the chal­lenge of ex­tract­ing more power and faster charge times from the lithium-ion tech­nol­ogy used in smart­phones to­day. Boe­ing suf­fered elec­tri­cal fires from the lithium-ion bat­ter­ies aboard its new 787 jet, and Dell with self-com­bust­ing lap­tops, noted Man­mo­han Sodhi, a pro­fes­sor of op­er­a­tions man­age­ment and sup­ply chain at Cass Business School in Lon­don.

But Sam­sung erred in striv­ing to “fix the prob­lem too quickly”, he said. Now, with the to­tal shut­down of Note 7 pro­duc­tion, “it sends a bad sig­nal to the market that there is panic in the board­room”. There may be no quick fix to undo the past few weeks, dur­ing which it ap­peared that Sam­sung’s of­fi­cial re­sponse ap­peared to lag that of na­tional reg­u­la­tors, air­lines and mo­bile phone car­ri­ers.

But Sam­sung should at least shed any in­hi­bi­tions it may feel about be­ing more forth­right with its cus­tomers, said Yves Robert-Paul, who heads cri­sis com­mu­ni­ca­tions for French ad­ver­tis­ing group Havas. Since Sam­sung started re­call­ing the ph­ablets last month, he said, it has of­fered only “a prag­matic re­sponse, de­void of all emo­tion”. “They’ve run it like an in­dus­trial disas­ter but they for­got to think about their cus­tomers.” —AFP

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