The Note 7 disaster has stark repercussions for Samsung Mobile, who face not only slashed profits but also increasing competition from the likes of Google and Xiaomi. This case presentation examines the lay of the smartphone industry, the reasons behind the Note 7 debacle and then identifies and recommends alternative strategies Samsung Mobile can use to recover their momentum going forward.

1. SAMSUNG
MOBILE?
I N T H E P O S T N O T E 7
L A N D S C A P E ,
W H A T L I E S A H E A D F O R
B U S I N E S S S T R A T E G Y ( W 5 0 1 )

2. A BUSINESS STRATEGY (W501) PRESENTATION
PREPARED FOR
SHEIKH MORSHED JAHAN
ASSSOCIATE PROFESSOR
INSTITUTE OF BUSINESS ADMINISTRATION,
UNIVERSITY OF DHAKA
PREPARED BY
MARUF HASAN, ZR-13
MD. DANIAL RAFI, ZR-27
SHARMILI ROWSHON KABIR, RH-30
MUHTASIM SAROWAT RAYED, ZR-61
BBA 21st, SECTION A
A2 SUBGROUP 1

3. OUTLINE
01 02 03 04 05
PROBLEM
IDENTIFICATION
CASE ANALYSIS
IDENTIFICATION AND
EVALUATION OF
ALTERNATIVES
IMPLEMENTATION
PLAN
RISKS

4. PROBLEM
IDENTIFICATION

5. CORE ISSUE
How can Samsung Mobile turnaround after
a massive drop in profits and damage to
brand equity after the Note 7 disaster?

6. UNDERLYING ISSUES
LOSS IN BRAND EQUITY DUE
TO NOTE 7 DISASTER
Ineffective PR response
Massive coverage online DECLINE IN PROFITS AND
OPERATING MARGINS
Profits down by 96% after Note 7
recall
Operating margins lower than Apple
and shrinking over time
THREATS TO MARKET
DOMINANCE
Google in the US market;
Chinese smartphone
manufacturers in global markets

7. CASE
ANALYSIS

8. SMARTPHONE INDUSTRY OVERVIEW
Forecasted Global Market Size, 2016
$425.9 BILLION
SLOWDOWN IN INDUSTRY
GROWTH
2015 was last year of double
digit growth
Mature markets highly
saturated
Growth in emerging markets
also slowing down
MARKET CONSOLIDATION
Number of key players have
declined significantly
Apple and Samsung market
share far outstrip other
players
SHRINKING MARGINS
Only Apple (38%) and
Samsung (17%) have positive
profit margins
Premium pricing is key to
maintaining margins
GLOBAL VS DEVELOPED
MARKETS
Samsung is the global
market leader (22.7%)
Apple is leader in developed
markets like US (40%)

9. STRATEGIC GROUP MAPPING
QUALITY AND SPECIFICATIONS
PRICE
Samsung
Galaxy S
Samsung
Galaxy J
Series
iPhone
LG
Google
Pixel
Samsung
Galaxy
Note
Samsung
Galaxy A
Series
Xiaomi
Google
Nexus
Oppo
One
Plus
Local
(Walton,
Symphony)
Chinese
(Asus,
Meizu)
STIFF COMPETITION
IN ALL MARKET
SEGMENTS
High end segment
very overcrowded
SAMSUNG HAS
GOOD PRODUCT
LINE WIDTH
Present in all three
major segments

10. APPLE VS SAMSUNG
PATENT WAR
Ongoing legal battles since 2011
Recent Court of Appeals verdict
favored Samsung over Apple
SAMSUNG PRODUCTS
HISTORICALLY SEEN AS INFERIOR
Poor build quality, poor software
integration (Android) and support
APPLE ATTACK ON SAMSUNG’S
PHABLET NICHE
The iPhone 6 Plus, Apple’s first big
phone, lead to 73.9% drop in
Samsung profits in Q3 2014

11. APPLE’S TRANSITION
FROM INNOVATOR TO LEADER
HEALTHY GROWTH IN
REVENUES AND PROFIT
Revenue has doubled to
$200 billion in the five years
since Tim Cook became CEO
STABILITY OVER
CREATIVITY
Cook pushed out creativity-focused
executives; only one big design
change in iPhone in 5 years
VULNERABILITY TO
DISRUPTIVE INNOVATION
Microsoft, Google and
Amazon investing heavily in
mobile AI

12. THE NOTE 7 DISASTER
ANATOMY OF
New mobile chief, DJ Koh,
pushed hard for more
innovative features
Large increase in
marketing budget (S6 was
biggest smartphone
launch ever)
STRONG PUSH
TO BUILD
PREMIUM
BRAND AFTER
IPHONE 6
Note 7 deadline was
pushed up to compete
with upcoming iPhone 7
Several features were
added which put pressure
on suppliers to meet
deadlines
RUSH TO TAKE
ADVANTAGE OF
DULL IPHONE
First reported explosion on
Aug 24; recall announced on
Sept 1
Multiple recalls announced
Customer representative tried
to suppress customer
complaint
INEFFECTIVE
RESPONSE TO
PHONE
EXPLOSIONS
Samsung engineers still
unable to determine cause
of explosions
Explosions of S7 phones
and washing machines also
being reported
INABILITY TO
PINPOINT CAUSE
OF DEFECT

13. POST NOTE 7 LANDSCAPE
SEVERE DAMAGE TO
SAMSUNG’S PROFITS
30% fall in Q3 2016 profits
16.8% fall in overall profits
(96% fall in mobile profits)
GOOGLE PIXEL: POTENTIAL
GAMECHANGER?
High end phone with solid
specifications and strong
software integration (similar
to iPhone)
SLOWDOWN IN APPLE
SALES
5% fall in iPhone sales even
after iPhone 7 launch
First decline in iPhone
profits in 15 years
OTHER COMPETITORS
STEPPING UP
Chinese manufacturers like
Xiaomi are focusing on
innovation (Mi Mix concept
phone)

14. IDENTIFICATION
AND EVALUATION
OF
ALTERNATIVES

15. RESTORING BRAND EQUITY
ALTERNATIVES FOR
SHUT DOWN NOTE LINE
AND FOCUS ON GALAXY S
AS SOLE FLAGSHIP
SHUT DOWN NOTE LINE
AND CREATE NEW
PREMIUM BRAND
ATTEMPT TO SALVAGE
NOTE LINE WITH NEW
MODEL

16. RESTORING BRAND EQUITY
EVALUATION OF ALTERNATIVES FOR
SHUT DOWN NOTE LINE AND FOCUS ON GALAXY
S AS SOLE FLAGSHIP
Will leave premium end vulnerable to competition
Margins will decrease
BRAND EQUITY
PROFITS AND MARGINS
DEFENSE AGAINST COMPETITION
6/10
7/10
6/10
6.5
SHUT DOWN NOTE LINE AND CREATE NEW
PREMIUM BRAND
Strong marketing push required, which will increase
costs. Will take time for revenues to pick up
BRAND EQUITY
PROFITS AND MARGINS
DEFENSE AGAINST COMPETITION
7/10
6.5/10
7/10
6.75
ATTEMPT TO SALVAGE NOTE LINE WITH NEW
MODEL
Before disaster, Note line had high brand equity
Difficult to pull off in next year
BRAND EQUITY
PROFITS AND MARGINS
DEFENSE AGAINST COMPETITION
8/10
7.5/10
7/10
7.5
OUR RECOMMENDATION
Retain and relaunch Note line after 2 years. For now focus on Galaxy S

17. RESTORING PROFITS AND MAINTAINING HIGH MARGINS
ALTERNATIVES FOR
STREAMLINE AND
IMPROVE HARDWARE
SUPPLY CHAIN
ADD/REINFORCE NEED FOR
PERIPHERALS (ADAPTERS,
DONGLES, BATTERY PACKS)
INTEGRATE SUPPLY CHAIN
WITH RIVALS LIKE GOOGLE,
HTC, MOTOROLA

18. EVALUATION OF ALTERNATIVES FOR
STREAMLINE AND IMPROVE HARDWARE
SUPPLY CHAIN
Solving hardware defects will increase brand equity
in long run
High margins key to maintaining dominance
BRAND EQUITY
PROFITS AND MARGINS
DEFENSE AGAINST COMPETITION
8/10
8/10
8/10
8
ADD/REINFORCE NEED FOR PERIPHERALS
Boosting peripheral sales will increase margin but it
will also decrease brand equity as users don’t like
too much additional accessories
BRAND EQUITY
PROFITS AND MARGINS
DEFENSE AGAINST COMPETITION
6/10
7/10
6,5/10
6.5
INTEGRATE HARDWARE SUPPLY CHAIN WITH
RIVALS LIKE GOOGLE, HTC, LG, MOTOROLA
Motorola and LG are reliable for their hardware and
have focused on innovation in recent years
Will be difficult to pull off a win-win result
BRAND EQUITY
PROFITS AND MARGINS
DEFENSE AGAINST COMPETITION
7.5/10
7.5/10
7/10
7.33
OUR RECOMMENDATION
Streamline and improve hardware supply chain
RESTORING PROFITS AND MAINTAINING HIGH MARGINS

19. MAINTAINING MARKET DOMINANCE
ALTERNATIVES FOR
INVEST IN DISRUPTIVE
TECHNOLOGIES
DEVELOP
INDEPENDENT OS
GREATER FOCUS ON LOW
AND MID END SEGMENTS
AND EMERGING MARKETS

20. EVALUATION OF ALTERNATIVES FOR
INVEST IN
DISRUPTIVE TECHNOLOGIES
Technologies like conversational AI will be
instrumental in near future
Already has good stakes in VR (Gear VR)
BRAND EQUITY
PROFITS AND MARGINS
DEFENSE AGAINST COMPETITION
9/10
7/10
8/10
8
DEVELOP INDEPENDENT OS
A strong independent OS will be able to compete
with Google and Apple on terms of integration
So far, any OS other than Android and iOS has
failed
BRAND EQUITY
PROFITS AND MARGINS
DEFENSE AGAINST COMPETITION
5/10
7/10
7/10
6.33
GREATER FOCUS ON LOW AND MID END
SEGMENTS AND EMERGING MARKETS
Will be able to check emerging competitors like
Xiaomi
Lower margins in low and mid end segments
BRAND EQUITY
PROFITS AND MARGINS
DEFENSE AGAINST COMPETITION
7.5/10
6/10
8/10
7.17
OUR RECOMMENDATION
Invest in disruptive technologies and focus on emerging markets, especially mid end
RESTORING PROFITS AND MAINTAINING HIGH MARGINS

21. IMPLEMENTATION
PLAN

22. IMPLEMENTATION PLAN
FOCUS ON REGAINING
CONSUMER TRUST
Issue public apology
(newspaper, email)
Sow seeds for building Galaxy
community (similar to Apple
community)
RESOLVE LEADERSHIP CRISIS
Either give Lee Jay-yong full
control or appoint steward to
assume control until the death
of the former chairman
STREAMLINE AND IMPROVE
HARDWARE SUPPLY CHAIN
Increase quality control for
third party suppliers
Must not rush deadlines or
face losing consumer trust
again
Focus on decreasing build
costs to increase margin
FOCUS ON S8 AND S8 EDGE FOR
2017
Build on goodwill of S7 phones
For premium end also release a
better version called S8 Edge+ mid
2017
2 YEAR DEVELOPMENT
CYCLE FOR NOTE 8
More focus on innovation
Strong quality control
Greater integration with
disruptive tech like AI, VR
and AR
GREATER IOT FOCUS ON
GALAXY S AND NOTE BRANDS
Emphasis on AR and VR and
other IOT tech to showcase
Samsung smartphones as
lifestyle accessories
01 02 03 04 05 06

23. IMPLEMENTATION PLAN
START BUILDUP FOR NOTE 8
LAUNCH NEAR END OF 2017
Teaser trailer
In following months steadily
‘leak’ details of Note 8
STRONG FOCUS ON PR OVER ATL
Emulate Apple which focuses on
strong Word of Mouth
Collaborate closely with tech blogs and
online media to generate positive buzz
HOLD LAUNCH EVENT FOR
NOTE 8
KEEP 2 YEAR
DEVELOPMENT CYCLES
FOR FUTURE NOTES
A new Note launch should
be sought after and be like
a special event
SHIFT TO MID RANGE IN
EMERGING MARKETS
As number of first-time buyers
decreases more and more
purchases will be to trade up to
better models
07 08 09 10 11

24. RISKS

25. RISKS
DISSATISFACTION FROM
LOYAL CONSUMERS
FOCUS
DILUTION
DRASTIC CUT IN
PROFIT MARGIN
HIGHER
CUSTOMER ATTRITION

26. THANK
YOU!