1. Impact and reaction of the stakeholders, impact on company image.

Ethics affects every individual from business owners, managers, and employees to suppliers,
customers, and competitors. A strong ethical business environment may lead to better
interactions with the stakeholders inside and outside the organization, which hence leads to better
output.
These unethical business practices have a negative impact on the stakeholders of any
organization. The same was the case with Samsung, they cheat and lie apparently because the
rewards are far more than penalties for these unethical practices.
If its stealing of the patents of other companies, or astroturfing this all leads to the loss of loyal
customers. They stopped liking the products when they know they are copied from renowned
brands and they switch their preferences. It also may lead the financers or the suppliers to back
off from providing service to such organizations who indulge in these practices. Providing fake
reviews to consumers leads to the loss of their trust in the organization. Consumers now do not
fully make their buying decision based on product reviews as they were more biased and were
not from a genuine user.

Moreover, those consumers, managers, and executives who care more about corporate social
responsibility took action against Samsung and highlight the issue of exploitation of labor laws
in the organization. Many consumers boycott their products and labor unions took legal actions
against them. Many employees who were unable to survive in those poor working conditions
were forced to leave their jobs leading to greater absenteeism in the company. This poor working
environment of distrust, stress, and conflicts between each other led to a drop in productivity and
lowered the morale of the employees which eventually lead to the downfall of the company and
reduced its sales.
Lastly, the explosions of the Samsung note 7 have adverse effects on the consumers. The
irresponsibility of Samsung in manufacturing the design of their new launch cost them the loss of
trust from consumers and also the legal authorities. They do not take care of accurate safety
measures due to which many consumers suffer and many were feared in using their phones.
Furthermore, these unethical business practices may provide a short-term benefit to the company
but in long term, they negatively impact the brand image. This decreases the company’s
credibility, trust and reduces consumer retention. Many suppliers or creditors won’t be willing to
work with any such brand that is accused of stealing patents, exploiting labor laws, or
astroturfing. The company is unable to maintain any long-term relationship with the customers.
This unethical behavior could become the brand identity of Samsung leading to further
deterioration of its reputation and perception in the mind of consumers, creditors, and suppliers.

1. What efforts/changes were made to control the damage and recover

Samsung made quite a few efforts to somehow control the damage caused by their unethical
behavior and to regain their lost market share. For the stealing of patents, Apple accused
Samsung of stealing $539 million of patents. However, both companies agreed on mutual
grounds and after years of a legal fight over patents between both tech giants, Samsung agreed to
pay $52million for the financial loss of Apple. Secondly, Samsung was charged with the sanction
of $340,000 by Taiwan’s Fair Trade Commission (FTC) for astroturfing; Hiring
people to post fake reviews about Samsung products.
Moreover, in order to improve the brand image regarding the provision of a better working
environment, Samsung issued a supplier code of conduct and restrict all the manufacturers to
follow them. However, the ethical failure of Samsung over this business decision could lead to
millions of dollars of fine from the Human rights and Child labor commission and could also
face shut down of their outsourcing company who was indulged in it.
Lastly, on the major case of explosions of Samsung note 7 Samsung reacted quickly over it. The
company stopped all sales of the Galaxy Note 7 instantly as the five replacements that were
made against the phone caught fire as well and the company asked all users to shut down their
phones. Samsung asked the retailers to take down the stock and ship them back. Their engineers
and the tech team try to figure out where the problem was. The company after a few days gave a
statement:
“Note 7's manufacturing defect affects less than 0.01 percent of all Note 7 handsets sold. “It is a
very rare manufacturing process error,"
CNET reports:
"The defect was revealed when several contributing factors happened simultaneously, which
included sub-optimized assembly process that created variations of tension and exposed
electrodes due to insufficient insulation tape,"
It cost Samsung $5.3 billion to gather the devices and set up testing facilities for them. They
tried in winning back the consumer trust who have seen videos of mobile exploding into flames.

Your:
 View on why the company chose to be involved in the said unethical practices

There is no views excuse for doing fraud or practicing unethical behavior with customers or in
business, however, companies that continue to do so must have to face its repercussions.
Samsung was involved in many unethical practices. There is no upside to it, either the company
was doing it intentionally or it extremely lacking in planning its business. They were more
focused on earning more profit in rather than creating long-term customer relationships. They
have been caught cheating and lying many times. It seems quite obvious that Samsung has made
some sort of internal cost-benefit analysis about their unethical business behavior and could have
concluded that it is totally worth it. For example, Samsung made a profit on the
phones containing Apple’s stolen ideas. And if they have to pay only the $52
million they’re saying they’re guilty of stealing — or the $379 million Apple
says they stole — it was probably worth it. They reap higher rewards rather than lower
penalties of their unethical behavior.
Moreover, Samsung has one of the largest market shares in smartphones so in order to meet the
increasing demand and put pressure on its manufacturers they asked their outsourcing company
to hire more workers and increase their shift timings; this result in the hiring of underage workers
and long shifts with no proper breaks. It was also done to lower down the cost as young people
will be comparatively cheaper labor for Samsung.
Lastly, the explosions of the Samsung Note 7 were mainly due to lack of greater investment in
safety and security measures. It says that if consumers will demand the safety of a product we
will take measures otherwise we will carry our operations as it is and the government has no
right to intervene. We as consumers are not so rational about risks and we don’t bother to search
and find out about the cons of the technological device.

 Recovery attempts – suggestions on how they could have recovered better & where are
they now.

Samsung is one of the tech giants and having a large market share could be seen that they had
recovered efficiently from their unethical behavior to gain back their reputation. Still today many
customers are loyal to Samsung and trust its products.
Samsung firstly needs to accept their fault and take accountability of the unethical behavior.
They need to improve their management perspective and increase field surveys of their
outsourced business in order to make sure that ethical aspects are properly taken care off by
them. They strictly need to make a code of conduct and make sure that the company follows it
accordingly.
They must prioritize compensating for consumer loss and work on creating a better brand
perception in the consumer’s mind by choosing to prioritize their needs and compensating for
their losses rather than earning greater revenue. This would really benefit them in creating long-
term consumer relationships.
Consumer protection should be the first and foremost need that should be ensured by the
manufacturer as consumer safety is a priority. Psychological egoism accurately fits here as the
company however was unaware but with the intention of profit motive caused harm to several
people. Since there is no government intervention there is no quality check of the product
however for better workplace ethics the company should adopt the practice of Contractual View
with the consumer which says that there is an unspoken and moral obligation of the producer
with the consumer and the consumer should keep in view the Reliability, Service Life and
Maintenance of the product but the company failed to do so.
It targeted the physical vulnerability of the consumers and caused them harm and lost their trust.
However the company should be responsible and have a duty to disclosure (stating cons of the
products), a duty not to misrepresent, and a duty not to coerce (enticing the consumer to spend
more than they should). The company also ignored the principles of Due Care Theory which says
that the company should protect consumers against all risks that the manufacturer can anticipate.
The company to reduce its costs compromised on its quality and had no contingency plan for this
explosion. This is unethical because it was designed that the risks are eliminated, it had no strict
quality control to eliminate defects and the consumers were not warned about all the dangers.
This case puts Samsung on a Conventional Stage where they are only concerned with making
profits while protecting their reputation and disobeying rules while consumer safety is taken for
granted.