Acct 3012 Essay

Samsung

Introduction

To satisfy ever-increasing customer expectations, managers need to find cost-effective and strategic approaches to improve the quality of their products. Especially for Samsung, the world’s largest maker of smartphones, however, it was still traumatized by the galaxy Note 7 battery catching fire scandals. In order to regain quality reputation, Samsung is working         on solid-state batteries to replace the notoriously unstable liquid lithium-ion batteries in Galaxy S8.

The Samsung’s quality management could be a fundamental element and has a significant influence on market satisfaction and financial success. It is interrelated with the strategic approach such as balanced scorecard, which is an important process to achieve the organisation’s strategies and objectives.

The essay will firstly discuss Samsung quality control potential issue and cost of quality implication. Then how Samsung’s decisions and initiatives in four perspectives are modified to achieve company’s quality goal. Finally, a conclusion will be delineated.

Quality Control Issue and Cost of Quality Implication

In 2016, Samsung made unprecedented Galaxy Note 7 recall, amounting to 5 billion. The reason behind is Samsung accelerated Galaxy Note 7 launch cycles, but its haste leads to short on (inadequate) quality testing. Quality auditors have little time to do a comprehensive inspection of incoming lithium-ion batteries; some phones with defective batteries are sold to customers. Failure to conduct effective quality control can result in significant unnecessary external failure costs, including recalls, warranty repairs and legal liabilities etc. Noticeably, the largest cost of quality is not recorded in accounting system--the opportunity cost of the contribution margin and foregone future smart phone sales due to customers’ disappointment. It in turn put Samsung in an advantageous position against its rival Apple and bad financial performance.

In financial quality-related measure, when redesigning Galaxy S8, Management straighten out quality management process. Firstly by implementing preventative initiatives, encompassing introducing new safety standards, rigorously supplier evaluation and redesign Galaxy S8 battery as solid and removable to avoid recurring quality issue. This guarantees the great efficiency of quality focused supply chian management and avoids defective batteries in the first place. Secondly, in appraisal costing, sophisticated auditors are assigned in testing stage; they implements extensive testing on phone samples, including overheating and destruction tests etc. The feasible conformance quality spending is likely to minimize non-conformance costs in the long term: internal failure costs like rework and external failure costs such as dealing with customer complaints and replacement.

The limitation in quality report is financial measurement is more of a lagged indicator, therefore non-financial measurements such as balanced scorecard are needed to monitor strategic value.

Balanced Scorecard Application

In Samsung quality assurance website, its vision is to “ensure the consistent delivery of excellence based on an effective quality management system that guarantees products and serviced, beyond customer expectation”. Even though Note 7 shows the weak link in internal business perspective, Galaxy S8 has reinforced balanced scorecard in congruence with company vision: Firstly, in learning and growth perspective, management encourage employees to apply for certified Quality Engineering, and introduce quality education and training program, targeting to improve employee’s quality awareness and statistical skill, this combines the company’s management objective and individual career development. Secondly, sophisticated employees expected to improve internal business process, which is more likely to increase quality testing efficiency, reduce quality defects and avoid defective batteries shipped to customers.