Driven by huge smartphone sales and clever marketing, Samsung’s mobile division enjoyed a spectacular two-year run from the end of 2011 through 2013.
But things changed last year.
The company’s profits started tanking, which it blamed on increased competition from other smartphone makers. Most people blame Xiaomi, the Chinese startup that sells really nice phones at half the cost of Samsung’s best phones. Xiaomi was the top smartphone vendor in China last year.
As I wrote in my story on Samsung’s rise and fall, the company was shortsighted about the market and got caught by surprise once other Android phone makers started catching up.
However, that wasn’t the only problem. A lot of Samsung’s success was due to the “Next Big Thing” campaign that started at the end of 2011. (You know, those commercials that made fun of Apple fans waiting in line for the iPhone.) It was so successful that Samsung’s brand perception switched seemingly overnight. Suddenly, Samsung’s phones were in the same conversation as the iPhone.
Not everyone in the company saw it that way. Executives at Samsung’s Korean headquarters didn’t see it that way. In 2012, they flew auditors to Samsung’s offices in Dallas for an unannounced audit that lasted three weeks.
Here’s how it went down, as detailed in my story:
The success of Samsung’s Mobile in the US began a rift with the Korean headquarters. Sources say the more successful Samsung was in the US, the more complicated the relationship with headquarters got. Instead of getting credit, the US team felt they were being chastised for doing their jobs well. (Samsung declined to comment on this story.)
It got so bad, a source told us, that Samsung flew a plane full of executives to the mobile division’s office in Dallas for an unannounced audit that lasted three weeks in 2012. The Dallas-based employees had to go through all materials they used to sell and market Samsung’s mobile products. They were accused of falsifying sales, bribing the media, and a bunch of other damaging actions that hurt morale in the office. The same US-based office that helped turn Samsung into a brand as recognisable as Apple was suddenly being punished for its work.
After three weeks, the Korean auditors found nothing wrong with the way the US office had been operating and went home. But the damage had been done, and the perception remained at the Korean headquarters that despite its success, the US team was up to no good.
In fact, during one meeting with the global teams at Samsung’s headquarters in Korea, executives made the US team stand up in front of several hundred of their peers in an auditorium. The executives told the employees to clap for the US team as encouragement since they were the only group failing the company, even though it was clear to everyone the opposite was true.
So, even though Samsung’s international teams wanted to adopt the “Next Big Thing” campaign, they couldn’t because of that rift between the US and Korean headquarters.
NOW WATCH: Tech Insider videos
Business Insider Emails & Alerts
Site highlights each day to your inbox.