How Samsung Botched Its Galaxy Note 7 Recall

How Samsung Botched Its Galaxy Note 7 Recall

By Georgia Wells, John D. Mckinnon and Yun-Hee Kim

Wall Street Journal, online edition

September 16, 2016

Yi Lan

GR522

September 18,2016

The article, “How Samsung Botched Its Galaxy Note 7 Recall” by Georgia Wells, John D. Mckinnon and Yun-Hee Kim serves as effective cases of the knowledge that we learnt recently. Samsung Galaxy Note7 has to be recalled because of exploding batteries.

 The article mentions Apple and Samsung for several times. There is also a comparison between the date that Note 7 was launched and the date that iPhone 7 was launched. Samsung attended to grab the chance that iPhone 7 has not been launched to sell more Note 7. The sentence that Neil Mawson said “Samsung cannot afford lose an inch of competitive ground to Apple in its home U.S. market” is the best explanations to the concept of substitutes. Nowadays, the technological market is competitive. According to the passage, “The U.S. accounted for 15% of all Samsung smartphone shipments worldwide in the second quarter”, we can know that Samsung is a leading figure in this field. So is Apple. Most of customers choose one of them to buy phones. After the explosion of battery in Samsung, potential customers of Note 7 would turn to Apple products. Graph below shows the demand curves and the shift of curves.

                [pic 1]

Hence, when the Samsung Note 7 has the hazard to ignite itself, the demand for Note 7 decreases. Then, the demand for iPhone 7 rises. We can assume that the demands for Note 7 and iPhone 7 are the same, as the green curve that shows in the graph. After this recall, the demand curve for Note 7 would shift to the left as the red curves draws and the demand curve for iPhone 7 would shift to the right as the black curve indicates. Otherwise, if iPhone 7 has even more serious safety hazard, customers would demand more Note 7 but not iPhone 7. At this time, the black curve would be Note 7 and the red curve would be iPhone 7.

Then, the article cites some customers’ words. These citations are good example to illustrate the concept of opportunity costs. According to Mankiw’s definition, opportunity cost of the product is what customers give up to get the item. Mr. Lees, who uses his Note 7 to do the management of equipment database, said “They want you to return your phone, but that’s just not an option for me” after the recall of Note 7. Although Samsung offer to replace loaner phones to Mr. Lees, after doing investigation, Mr. Lees rejected it. It might takes a week to getting loaner phones ready after returning Note 7. “A week of time getting that ready, and then I’m going to get a replacement phone and have to set that up again”, Mr. Lee claimed. For Mr. Lees to get a loaner phone, he has to spend a week without smartphone to because that he has to wait for loaner phone. In addition, he has to go through all the setting again. Especially, Mr. Lees needs his smartphone to work everyday. That is to say, the opportunity cost of getting a loaner phone, is the convenience at work and the time that has to spend to wait.