Managing in Troubled Times Case Study

Dell’s Recall of Batteries: Would it Taint Dell’s Image?

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Abstract:

Dell, one of the largest PC makers in the world, on 14th August, 2006 recalled 4.1 million notebook batteries. The recalled batteries were manufactured by Sony Corp., Japan. The batteries were defective and Dell felt it best to recall and replace the batteries free for all affected customers. Dell was a proprietary parts manufacturer. This recall which was the third such was Dell’s nemesis. Dell’s customer perceptions and its after sales service had much to be desired. Confidence in Dell’s notebooks remained a big question mark when the third incident occurred and the company seemed not to have taken action or the action that was to be taken of returning the faulty batteries were seen by some as a dilute method of appeasing customers as they expected a company like Dell to double check their quality especially since the batteries were outsourced. Dell with its unique marketing philosophy of not retailing their products needed to have double insurance as far as winning and retaining customers were concerned.

Dell had recalled batteries in 2001 and in 2005. Dell seemed to know what exactly was wrong with its batteries, but behaved like an ostrich and buried its head in the mud and continued to market the same batteries. The recalled batteries were expected to cost at least $246 million to Dell. Sony agreed to share a part of the cost. The financial aspect was one part of the recall but unquantifiable was the reputation of the company that went along with the recall. While people would buy products for the brand name and what it represented it would be rare if one remembered all components of the products. The recall hence had a longer lasting negative impact on Dell rather than Sony.

Sony though willing to lend a hand financially also stated that it did not have the manufacturing capacity to produce so many batteries within the time required for its replacement. This meant that an outsourced contract was being sub-contracted to yet another supplier. What would happen to the customer? The average customer had already lost confidence in Dell, with new batteries not necessarily manufactured by Sony but some unknown manufacturer how did Dell propose to satisfy its customers on quality and more important how did it propose to attractive new clientele.

How would Dell handle this crisis? What would happen to Dell’s image and reputation with the recall? And would Dell and Sony continue their relationship after this third fiasco?

Pedagogical Objectives:

• To discuss about the world PC market
• To understand Dell Inc as the largest PC makers in the world and its competitive strategy
• To analyse the impact of Dell’s recall of its batteries on its image and reputation.

Keywords : Dell Inc.; Sony Corp.; Largest Battery recall; Notebooks; Lithium-ion Batteries; Consumer electronics; Consumer Product Safety Commission; Managing in Troubled Times Case Study; Faulty Batteries; Hardware Industry; Burnt Laptops; Crisis management