Masco

EXECUTIVE SUMMARY

There are threats faced by Masco are that are both external and internal. Externally Masco faces few threats with the exceptions of economic uncertainty. It currently holds large market shares in most of its operating units, primarily because it targets acquisitions where the competition is fragmented. Currently there is a lack of synergy between operating units. While the efficiencies and its price per unit cost of its manufacturing operations are great, I can't help but thinking about our lessons of economies of scale and scope and how Masco is not leveraging these to their fullest potential.

The company is also carrying large volumes of inventory, specifically in their retail household consumer businesses. While the reason for carrying this inventory is certainly important, this poses a real risk to the company. Undetected change in customer's demands and inflections in the economy could cause the company to be caught with large amount of excess finished goods inventory presenting financial risk to the profits of the company. This inventory strategy does not fit well with there currently objective of moving into the wooden furniture and upholstery business.

Internally Masco is not maximizing the economies of scale and scope by allowing acquisitions to operate autonomously. When Masco performs an acquisition they tend to let the companies operate independent, with executive oversight. While this is important in small start up type companies for creative reasons, it does little to capitalize on the company synergy. In other words the company is not maximizing it economies of scale and scope effectively.

To protect our current standing, I recommend that we focus our efforts on the following to increase our profitability:

1. The company should not move into the wood and upholstery