Having enjoyed the “rockstar” status in smartphones in the August of 2016, no one could have predicted that a month later, Samsung would face its biggest challenge as its flagship product Note 7 began exploding, forcing airlines to ban the phone onboard. The South Korean giant tried to underplay the incident but was forced to recall Note 7. Sales were hit globally including in the Middle East and North African region, which is one of the their biggest target markets. Estimates are that the Note 7 debacle will cost Samsung USD 2.1bn in revenue globally. In addition to this, Samsung was linked to a corruption scandal and exploding washing machines also.
No matter one looks at it, 2016 was not Samsung’s year. According to BrandIndex, YouGov’s global daily brand tracker, the impact of it was that the brand’s perception took a major beating. Samsung Mobile’s perception in the UAE, measured with YouGov’s Buzz score, dropped from +48.6 in the beginning of September to +3 currently.
The brand’s purchase consideration score – which measures respondents’ interest in a brand for their next purchase – also declined, dropping from 43.2 percent in the beginning of September, to 34.6 percent in October.
The bad publicity led to speculations that Samsung would take months to win back consumer confidence or might even lose the game completely. Though in all fairness, that was being too extreme. Samsung is too strong a brand to be wiped out by the battery debacle. Perhaps that is why the brand is confident of overcoming this roadblock.
In his keynote address at CES earlier this month, Tim Baxter, President of Samsung Electronics America addressed the debacle. “We continue our intensive efforts, internally and with third-party experts, to understand what happened and to make sure it does not happen again,” Mr. Baxter said, adding, “Despite our setbacks we have not, nor will we, stop innovating.”
The brand continued to power ahead by reporting a 50 percent uplift in its profit estimates for the fourth quarter – driven by its semiconductor and display arms. It is set to see its highest quarterly profit since 2013 by raking in USD 7.8bn in operating profit between September and December. The profits are a reminder that the brand architecture of Samsung is too big to be affected by the failure of one product.
Even as the brand’s electronic products and component manufacturing will continue to make up for the losses of drop in sales of smartphones, consumer short memories is expected to aide in the way forward. Remember the “Dieselgate” scandal that affected Volkswagen in 2015. Considering that scandal did not impact the German manufacturer as much as was predicted, Samsung’s troubles are comparatively manageable. So, while there might be short term loss, the long term prospects continue to remain promising for brand Samsung as long as it keeps surging forward.