Have the Galaxy Note 7 fires destroyed Samsung’s chances of competing with Apple?

Michael Jacobides and Vijay Michalik
Samsung has scrapped the Galaxy Note 7 (Source: Getty)
Michael Jacobides, associate professor of strategy and entrepreneurship at London Business School, says Yes.

The Galaxy Note fires have been a serious blow for Samsung, not least because this is the second time that the company has had to recall this product. As we trust mobile devices to be not only the gateway to our communication, but also financial information and productivity, we expect those devices to be constantly reliable – and more importantly safe.

That said, it would be a mistake to just write Samsung off and consider Apple a winner. Companies have rebounded from far worse crises, and it appears that Samsung has pulled the plug decisively. Provided that no information now arises about potential internal cover-ups, Samsung should be able to remain a force in the market.

But this is an increasingly competitive arena. And as the company looks to the future, it will need to focus not only on the threat from Apple, but also on new rivals, such as Xiaomi, and players in other parts of its ecosystem, like Google, who are working hard to make more value migrate their way.

Vijay Michalik, research analyst at Frost & Sullivan, says No.

While this episode will have a large impact on short-term profits, it’s important to remember the scope and scale of Samsung’s business. As around $100bn, the mobile division represents only half of company revenues.

Until now, it has maintained a leadership position in the smartphone market despite Apple’s continued success. This is mainly thanks to a wider portfolio of handsets, appealing to consumers across multiple price points, at a lower average selling price per user. Core competition between Samsung and Apple happens only over a fraction of the Samsung business – the flagship Galaxy S and Note series phones and the high-end smartphone market.

Clearly, the fire incidents are damaging to reputation, and the immediate impact on the bottom line of the division will be painful. However, if it can underscore this moment with a clean recall, Samsung stands to rebuild its perception of value and trust, especially around the release of the Galaxy S8 in February 2017.

City A.M.'s opinion pages are a place for thought-provoking views and debate. These views are not necessarily shared by City A.M.

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