Image: Hans Olav Lien Image: Hans Olav Lien

Samsung haven’t had a good run of things recently. The reports that the batteries of their Galaxy Note 7 were catching fire, followed by further complaints of replaced phone batteries also causing safety risks, have led to company shares taking a tumble.

On Tuesday, investors wiped $19bn, the equivalent to £15.3bn, off the company’s value as the stock fell 8% in South Korea.

This was before Samsung announced it had permanently stopped the Galaxy Note 7 production. Announcing the news, the company said: "We recently readjusted the production volume for thorough investigation and quality control, but putting consumer safety as top priority, we have reached a final decision to halt production of Galaxy Note 7s.

"For the benefit of consumers' safety, we stopped sales and exchanges of the Galaxy Note 7 and have consequently decided to stop production."

Dr Mark Johnson, associate professor of operations management at Warwick Business School said the initial recall of the phone had been an example of “how not to do a recall”.

He said: “In research that I have conducted with Marko Bastl, of Marquette University, and Mike Bernon, of Cranfield School of Management, we found that firms that have a proactive recall strategy tend to see their share price not hit as badly by investors running scared from the potential costs of the recall.

"In Samsung’s case, the recall was very passive. It was only when the second batch of phones began to fail that they began to show that there were more serious issues at play. Shareholders rightly get twitchy when firms are seen not to care about customers.”

Last month, Samsung recalled 2.5 million phones after numerous complaints of exploding batteries. These were then replaced with new devices which were deemed safe by the company. But an increasing amount of reports said otherwise, as replacement phones were also catching fire.

Dr Johnson added: "Recalls are a fact of modern business. As products and processes become more complex than the likelihood of them occurring increases. We can’t get everything right all the time. When a recall occurs, be proactive about it – show shareholders that you care about customers and ensure that you have business processes in place to allow you to identify affected products quickly and with minimum hazard to the customer.

"Samsung tried to rush the Note 7 to market to beat the iPhone 7. Phones are complex things and the launch of new products is fraught with difficulties and delays. Samsung potentially rushed a number of critical stages, probably testing, in order to get to market quickly.

"The recall also indicates that Samsung is not as agile as some of its competitors and process-rigidity can mean a loss of flexibility. The process of the recall also indicates that Samsung has very little traceability or integration through the end-to-end supply chain. It was asking customers to identify affected phones in the first round of recalls by examining the colour of the battery signal on the screen. In the 21st century many companies can trace where items are through linking information processes with distributors and vendors."