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Limiting Damage from Smartphone Recall too Tough for Samsung to Handle

Limiting Damage from Smartphone Recall too Tough for Samsung to Handle
Samsung Electronics is still desperately trying to limit the damage of a record global recall announced more than a month ago with heated meetings, sacrificed holidays and teams monitoring social media round-the-clock to track whether there have been any new smartphone fires.
In major markets, including the United States and South Korea, most of the fire-prone Galaxy Note 7s have been recovered, Samsung said.
But for Samsung’s mobile division chief Koh Dong-jin, who bowed in a public apology last month, less than a year into the job or for South Korea's largest listed company, the trouble is not over.
Fresh investigations by safety regulators were prompted after the family that owns a replacement model claimed that at it had began smoking inside a U.S. plane on Wednesday, and this knocked Samsung's hopes of finally getting ahead of the crisis.
And additionally, pressure to split the company and pay out $27 billion in a special dividend is being exerted on Samsung by one of the world's most aggressive hedge funds, Elliott Management.
A Samsung insider, who declined to be named due to the sensitivity of the subject, was quoted in the media as saying that the Note 7 crisis is worse than any other the company has faced.
"It directly impacts our products, our brand, and trust with consumers," the sources reportedly said.
Samsung is focused on the Note 7 replacement process and was not thinking about management or organizational changes, the company said in a statement.
To enable the company to defend market share against Apple Inc and other rivals and salvage the fourth quarter, unassuming Koh needs to get sales moving again, say Samsung insiders.
"If this doesn't get fixed quickly, everybody loses," said a second Samsung source. The source added that as yet there was no finger-pointing at Koh or other executives.
With additional incentives for those buying the device in October, TV ads for the Note 7 resumed in South Korea last week.
"We will give Note 7 all the support we were going to give it in the first place. There is no backing away from it," David Lowes, Samsung's chief marketing officer in Europe, told Reuters.
Criticisms against fumbling of the recall has been some of the toughest leveled at Samsung.
It was only after a warning was issued by the U.S. consumer protection agency did Samsung warn affected users to immediately turn off their phones. Samsung was criticized for not following proper recall procedures by the regulator.
While Samsung was forced to delay resuming sales in South Korea due to a slow recall progress, some users claimed their phones caught fire in China where Samsung says its Note 7 uses safe batteries.
Samsung needs to woo its customers, said Eric Schiffer, brand strategy expert and chairman of Reputation Management Consultants based in Los Angeles.
"They need to be very transparent. Invite customers who have been affected to the plants...let go of whoever was in charge of this debacle, and accept responsibility and show goodwill by sending new phones, giving discounts - anything to show the importance of the customer relationship," he said.

Christopher J. Mitchell

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