Living Case Study

GUIDED STUDY OF MASCO CORPORATION

EXECUTIVE SUMMARY
Findings
Significant findings regarding the major strategic issues, challenges, and choices facing Masco
Corporation are that, although the comprehensive strategic changes implemented by President and
CEO Keith J. Allman soon after his promotion have laid a strong foundation with respect to aligning
the company’s guiding stars with its culture, structure, and strategies, Masco is neither leveraging its
strengths nor exploiting all of the opportunities available to it. Because of this, its vision “…to be
recognized as the global leader in the innovation and marketing of quality building products and
services” is further away from the present than it needs to be (Masco Corporation, 2016b).
Strategic communication, the underlying mechanism through which all progress is made has not been
utilized to its full potential; this constitutes Masco Corporation’s primary weakness (Glassdoor, 2017).
The positive message conveyed in the Annual Report to Shareholders by Keith J. Allman contrasts with
the negativity communicated by current and former part-time and full-time employees who have
formed a pattern in relaying that they have no clue about the company’s aims (Glassdoor, 2017).
Masco’s other weakness is its excessive use of long-term debt. Fortunately, the incorporation of the
lean Masco Operating System Methodology has prompted the usage of divestiture and retrenchment
strategies to drive down debt (Masco Corporation, 2016b). Results demonstrate that the efforts are
effective; still, corporate waste associated with employee turnover and training that is based on a
lack of incentives for first-year employees proves to be a significant obstacle in implementing strategy
with efficiency, maintaining cost reductions, and sustaining a positive corporate culture (Glassdoor,
2017).
Moreover, Masco is aware of the unnecessary risks it is exposing itself to by lacking control over its
suppliers, depending heavily on two customers, and failing to adapt to the changing consumer
preferences associated with the rise of mobile technology and technology in general (Masco
Corporation, 2016a). Nevertheless, the company’s current strategies utterly fail to address those
issues, and it has in turn failed to maximize to its full potential because its internal strengths can, in
fact, be utilized in conjunction with every single one of its current strategies to deflect, diminish, and
even eliminate said risks (Masco Corporation, 2016b).

Recommendations
In light of findings on the strategic management of Masco Corporation, several recommendations have
been made to sustain the existing alignment while truly leveraging the organization’s resources to
minimize the risks and maximize the returns associated with its continued existence.

Overall, it is recommended that Masco improve the frequency and quality of organization-wide
communication, offer rewards and incentives for newer employees, recommit to, renegotiate terms
with, and/or gain control over existing suppliers, continue cutting unnecessary costs related to
executive-level compensation, employee turnover, and customer and supplier bargaining power, and
leverage the freed-up resources to implement an e-business strategy that facilitates the online
purchasing process, expands the company’s international influence, and transfers reduced costs to
consumers via lower prices (Masco Corporation, 2016a). These actions can all be accomplished via the
persistent implementation and evaluation of current strategies as well as the implementation and
evaluation of backward integration, forward integration, and low-cost leadership strategies (David,
2010).

Masco should attempt to pursue these three strategies as soon as possible; however, the importance of
each strategy may prove to be a deciding factor in determining which to implement first in the event
that all cannot be implemented simultaneously.

Supplier bargaining power serves as Masco’s highest concern; therefore, a backward integration
strategy is the top priority (Masco Corporation, 2016a). Acquisitions are the most resource-intensive
and difficult decisions to make; after all, alignment is at stake. Because of this, results expected from
executing this strategy include the acquisition of at least one foreign supplier – one possessing
considerable buying power and/or cultural compatibility relative to others – within each product
segment by 2022 and the reduction of overall supplier transaction costs by no less than 20% by
2022 (Masco Corporation, 2016a).

A forward integration strategy is the second priority, and it is a precursor to the low-cost leadership
strategy, in a sense, in that decreases transaction costs while targeting a broader market (David,
2010). As a result of executing this strategy, one should expect the creation of a company-wide e-
business platform that enables consumers to purchase products directly from every single one of its
subsidiaries by 2020 as well as an agreement wherein major customers such as Home Depot and
Lowe’s handle logistics and delivery to the consumers who purchase directly from Masco’s e-commerce
platform should be expected by 2022 (Masco Corporation, 2016a).

Finally, Masco should pursue a low-cost leadership strategy to provide further differentiation from
competitors in each of its four product segments (Mind Tools, n.d.). Results expected from executing
this strategy include a 10% reduction in variable overhead costs for all 18 of Masco’s subsidiaries by
2020 and a 5% reduction in the price of each subsidiary’s top-selling brand by 2020 (Masco
Corporation, 2017k).

Implementation of these strategies will decrease financial resources and increase physical and human
capital in the short-term. On the bright side, long-term results, of course, will involve a return far
outweighing the short-term decrease in financial capital.
Lastly, the new emphasis on strategic communication should engender a culture of open and honest
communication that is conducive to consistent reviews and revisions of the current and proposed
strategies.
Low- to mid-level employees on the front lines of implementation must conduct clear and concise
reviews on a weekly basis to formally inform managers of progress as well as to quickly deflect and
eliminate possible unforeseen issues (Harvard Business School Press, 2005). Formal progress reports
must also be compiled and sent upward by subsidiary managers monthly (incorporating information
from employee reviews) as well as quarterly to keep top executives informed (Masco Corporation,
2017k)
Masco must also exercise appropriate management controls so that adjustments are made and its
actions and results realign with said strategies (David, 2010). More specifically, it will assess unit
goals on a monthly, quarterly, and annual basis because action plans have a greater short-term
impact on their performance metrics while company-wide strategic goals will be assessed quarterly
and annually to ensure the company’s progressing over the long term (David, 2010).
Masco Corporation has quite recently made great strides in reaffirming its capabilities and realigning
its activities with its guiding stars (Masco Corporation, 2016a). Unfortunately, miscommunication and a
knowledge of, yet a failure to act upon, potentially destructive internal and external factors have
prevented it from leveraging its maximum potential (Glassdoor, 2017). Luckily, by following these
recommendations, Masco Corporation will take the next step toward achieving its present goals,
placing it on a path of sustainable success that ultimately results in the accomplishment its vision “…to
be recognized as the global leader in the innovation and marketing of quality building products and
services” (Masco Corporation, 2016b).

STRATEGIC STUDY
Historical Background and Present Context
Alexander Manoogian, an immigrant from Turkey with a desire to achieve financial security and, in
turn, provide a new life for his family in America, founded and initially organized Masco Screw
Products Company in 1929 (Masco Corporation, 2017l). From the very beginning, Masco has called
the Detroit area its home (Masco Corporation, 2017m).

Masco went public in 1936 and was listed on the Detroit Stock Exchange (Masco Corporation,
2017m). Following the commencement of World War II, the company began manufacturing materials
in order to support the war effort; as a result of the organizational learning experienced during this
shift, Masco was primed for growth and became a leader in the metalworking industry (Masco
Corporation, 2017m).

A major inflection point in Masco’s history took place in 1954 when Manoogian perfected the design
of the first single-handle faucet, also known as the Delta Faucet (Masco Corporation, 2017m).
Because it revolutionized the plumbing industry, high demand prompted Masco to build a factory in
Indiana for the sole purpose of manufacturing the faucet (Masco Corporation, 2017m). Such
expansion and diversification led to several noteworthy changes that have lasted up to this day: The
company officially changed to its present name, moved its headquarters to its current location, and
was listed on the New York Stock Exchange with a ticker symbol of MAS (Masco Corporation,
2017m).

With Alexander’s son Richard A. Manoogian as the new President and CEO, Masco achieved the
status of a Fortune 500 Company (Masco Corporation, 2017m). Masco preserved the trend of growth
and diversification by attaining leadership roles in industries that were not only complementary to
their existing brands, but were growing as well (Masco Corporation, 2017m). Soon Masco formed a
new public company called Masco Industries, which allowed the company to secure its role in the
industrial component industry while it expanded at an ever-quickening pace (Masco Corporation,
2017m).

By the start of the new millennium, Masco realized that its profound evolution necessitated a
reorganization of its assets (Masco Corporation, 2017m). The firm soon streamlined into four distinct
segments: cabinetry, plumbing, decorative architectural, and windows and other specialty products
(Masco Corporation, 2017m). Notable brands under the Masco umbrella include Behr Paint and the
aforementioned Delta Faucet (Masco Corporation, 2017).

Although the organization has consistently adapted to the ever-changing business environment over
the years, it wishes to ensure that the public recognizes its immutable characteristic, which was summed
up well by the founder himself: “Do not be satisfied with average performance. Strive for excellence.
If you cannot give your customers a better value and a better product, do not sell the product” (Masco
Corporation, 2017l).

Masco’s current President and CEO is Keith J. Allman; he has filled this role since February 2014
(Masco Corporation, 2017j). In addition, former President and CEO Richard A. Manoogian has served
as Chairman Emeritus since 2012 (Masco Corporation, 2017j).

With respect to values, the organization makes a point to convey how its culture promotes diversity
(Masco Corporation, 2017c). It expresses its desire for a wide range of perspectives through the
diverse educational and experiential backgrounds of its Leadership Team and Board of Directors,
which include involvement in the automotive, banking, education, energy, finance, government, and
realty industries (Masco Corporation, 2017b).

Masco also prides itself on being an outstanding corporate citizen. Its primary focus is on creating
positive sustainable relationships with individuals, communities, and the environment via adherence to
high ethical standards, increased philanthropic engagement through the Masco Foundation (a non-
profit established in 1952 and financed by contributions from the Corporation), and investments in the
creation and utilization of environmentally-friendly technologies, respectively (Masco Corporation,
2017e).

Yahoo Finance’s summary of Masco conveys that its reliance on home improvement and construction
has posed a major risk to the firm's financial health (2017). Its graph of Masco's stock price history
over the last three decades shows that the collapse of the housing bubble undoubtedly facilitated the
company’s decline from 32.34 on January 1, 2005 to 4.53 on February 1, 2009. In fact, it took over
seven years for the price to finally reach and surpass its previous high, soaring back up to 32.64 on
April 30, 2016 (Yahoo Finance, 2017).

Due to its four product segments, Masco is a participant in several industries (Masco Corporation,
2016a).

Masco is primarily a member or the Construction Supplies and Fixtures industry (SIC 5039) (Google
Finance, 2017). Relative to industry peers, the company has the second-largest market capitalization
at 10.52 billion, the second-largest annual revenue at 7,142 million, and the second-largest annual
net income at 352 million; Cummins Inc. is currently the leader in those particular categories (Google
Finance, 2017). According to SIC Code, Masco is also a member of both the Plumbing and Heating
Equipment and Supplies (Hydronics) Merchant Wholesalers industry (NAICS 423720) as well as the
Paint and Coating Manufacturing industry (NAICS 325510) (n.d.). Even further, FIS Mergent Online
lists Wood Kitchen Cabinets and Countertop Manufacturing (NAICS 337110) as the company's
industry description (Company details, 2017).

All of said industries are reliant in some capacity on housing construction, and industry analyses reveal
that the slow but steady recovery of the housing market as well as President Trump’s plans to invest
heavily in infrastructure are continuing to have positive effects presently as well as on overall outlooks
(Arancibia, 2016).

Company Mission, Vision, and Other Guiding Stars

Masco Corporation’s business definition – the way it defines itself to stakeholders and differentiates
itself from firms both inside and outside its industry – conveys a sense of confidence in a clear and
concise manner (Masco Corporation, 2016a). It serves the purpose of identifying which consumers the
company targets, the several roles it plays in the supply chain, and the value it creates for its
constituents (Masco Corporation, 2016a).

Found on the Company Profile section of its Annual Report, Masco describes itself as a world leader in
designing, manufacturing, and distributing branded home improvement and building products (Masco
Corporation, 2016a). Masco then expands this profile on its Home webpage by listing the preeminent
brands in each of its segments and emphasizing how its diverse portfolio generates unique value for
customers and shareholders alike (Masco Corporation, 2017g).

Masco articulates its vision as a desire “…to be recognized as the global leader in the innovation and
marketing of quality building products and services” (Masco Corporation, 2016b). This statement –
emphasis on the words “the global leader” as opposed to “a global leader” – communicates that the
organization will stop at nothing to achieve superiority in every single one of its ventures (Masco
Corporation, 2016b).

Despite lacking an explicit mission statement, the organization appears proactive with respect to its
industry and its external environment by acting in congruence with its stated vision (Masco
Corporation, 2016b). Its focus on corporate responsibility – its people, the community, and the
environment – improves its reputation and capitalizes on the growing need for sustainability and
diversity in the global arena (Masco Corporation, 2017e). In addition, although Masco had garnered
success following the recession, it has nonetheless continued to take the initiative and effect structural
changes, thus reducing risk and promoting long-term growth (Masco Corporation, 2016a).

For example, Masco’s proactivity toward accomplishing its vision is demonstrated in the recent
strategic changes implemented by President and CEO Keith J. Allman that are conveyed in its Annual
Report (Masco Corporation, 2016a). The changes listed in the report include the shift to a center-led
model that aligns Masco’s corporate structure with its new three-pillar strategy focused on driving the
full potential of core businesses, leveraging the collective strength of the firm, and actively managing
its portfolio. It also details that its most recent strategic success occurred when it spun off its Installation
Services businesses into an independent company known as TopBuild Corp.; in doing so, Masco
decreased its risk via reducing dependence on both North American and the heavily cyclical home
construction industry (Masco Corporation, 2016a).

Masco also has a commitment to excellence: “Driven by a focus on excellence in people, products,
service, and partnering relationships, Masco remains committed to being a premier growth company.
The Masco quest for quality and its standard of excellence remain as strong today as yesterday”
(Griffin Windows, 2017). This commitment is unspecific; however, it relates to Masco’s other strategic
statement – its vision – in that quality and growth are means to the end that it articulates in said vision
(Masco Corporation, 2016b).
Masco’s rationale for not explicitly expressing a mission statement is due to the manifold brands it
possesses and its relatively frequent entrances and exits into and out of different industries (Masco
Corporation, 2016a). Although Masco’s products currently have home building and construction in
common, it is possible that the company does not want to paint itself into a corner, so to speak, by
restricting its mission and, in turn, its image by articulating the components of a mission statement
(Masco Corporation, 2017f). Its vision, on the other hand, is articulated because its role as a forward-
looking statement means that it is available for modification and is not bona fide, so to speak (Masco
Corporation, 2016b).

Here is a draft of a valid mission statement for Masco Corporation:

With a strong commitment to excellence and a desire to help our own people, the world community,
and the planet, we at Masco Corporation strive to provide unique value and growth opportunities to
our shareholders by serving a global market, assisting our customers in constructing their homes and
workplaces through our offerings of high quality and state-of-the-art plumbing, cabinet, decorative
architectural, window, and other specialty products.

This mission statement explains what business the organization is in and what difference its existence
makes, differentiating it from competitors by containing the nine components of who the firm’s
customers are, its major products, its geographic market, its technological and financial statuses, its
values, its competitive advantage/unique value, its role as a corporate citizen, and its relationship
with its employees. Moreover, because Masco’s commitment to excellence extends to positively impact
everyone – from company shareholders’ financial health to all humans’ environmental health – what
logically follows is that its vision of being “recognized as the global leader in the innovation and
marketing of quality building products and services” will be closer to fruition than if it failed to
execute its mission (Masco Corporation, 2016b).

Once again, Masco’s vision “…to be recognized as the global leader in the innovation and marketing
of quality building products and services” implies that, at the moment, it is not viewed as the global
leader, but one global leader or competitor in the innovation and marketing of quality building
products and services (Masco Corporation, 2016b). By faithfully executing its mission, the organization
will achieve those goals and become a better business overall, eventually closing the gap between its
mission and vision. Finally, in the event that Masco does achieve its current vision, its new mission and
vision would involve maintaining its superiority and widening the gap between itself and its
competitors.

Based on the Masco Corporation’s long-term success and other external sources, despite a few
setbacks, it appears truly committed to its guiding stars.

Even though the company possesses a strong commitment to high ethical standards, such a long and
storied history inevitably included issues arising that were antagonistic to its goals (Decarlo, 2004).
For example, after a particularly negative year in which profits declined, Masco gained negative
publicity and shed light on the pervasiveness of corporate waste by publishing thousands of
hardcover Annual Reports in full color and on glossy, heavily coated paper stock (Roush, 1995).
Additionally, back when current Chairman Emeritus Richard Manoogian was still CEO, the disparity
between his income and shareholders' return was the most significant out of every boss and company
analyzed; such a finding did not bode well for Manoogian's and, in turn, Masco's reputation because
it communicated greed (Decarlo, 2004).
Nonetheless, the growth and prosperity the company has achieved through its business expansion as
well as through its corporate responsibility initiatives speak for themselves. As Juan Carlos Arancibia
explained in Investor’s Business Daily, Masco’s recent significant changes to its strategy are
contributing to its growth and establishing it as an industry leader (2016). Overall, the lack of
negative news about Masco over the last decade illustrates its commitment to achieving success
honestly and fairly, and its current corporate governance principles convey an understanding of
ethical precepts and socially responsible best practices (Masco Corporation, 2017d).

Masco clearly values diversity, hoping that varied perspectives coalesce to strengthen the company
and inform it of any weaknesses in its strategic content and/or process that may very well have been
ignored with a more homogeneous group of employees (Masco Corporation, 2017c). Its emphasis on
being a forward-thinking and progressive organization will likely attract the students, military
personnel, and other job-seekers from all walks of life that it desires to recruit (Masco Corporation,
2017c).

Keeping in mind that reviews on third party websites are subject to statistical biases such as voluntary
response bias, Masco’s current and former part-time and permanent employees have provided a
means through which gauge their sentiment by participating on independent review websites
(Glassdoor, 2017).

The review website with the most participation from said current and former employees is Glassdoor
(Glassdoor, 2017). Its results relay that, out of 85 responses from both part-time and full-time
employees, Masco Corporation earns three stars out of five, 54% recommend the company to a
friend, and 59% approve of CEO Keith J. Allman. Recurring themes in the website’s reviews include
the notion that Masco is a wonderful place to work with flexible hours after one has become a full-
time employee. On the other hand, it also reveals that many disapprove of the new management, and
they often mention that Masco does not care about employees as much as they used to. A majority of
the website’s reviewers even disclose that they felt as if the end was near several times during their
tenures due to upper-level management’s failure to communicate a clear-cut strategy and whether or
not adequate progress was being made (Glassdoor, 2017).

This evidence suggests that the CEO and upper-level management can provide better direction to its
employees (Glassdoor, 2017). Based on the company’s guiding stars and reports, the strategy is quite
clear (Masco Corporation, 2016a). Unfortunately, for the people who can arguably benefit the most
from the company’s guiding stars in terms of motivation, the strategy is unclear (Glassdoor, 2017).

Reflecting on Masco’s guiding stars, there are few, if any, inconsistencies. Each statement is broad, yet
specific enough to interact synergistically and work with an aim to accomplish the company’s goals of
continuous improvement and growth via the provision of high quality building and construction
products that positively impact everyone from company stakeholders to the global community (Masco
Corporation, 2016a). Nevertheless, it is recommended that Masco elucidate each of the guiding stars
on its website so that stakeholders can more easily discover and comprehend such crucial aspects of
the organization’s identity.

External Environment Assessment

Relevant currents, trends, and forces that are currently impacting and that will soon impact Masco
Corporation include those of the cultural, demographic, economic, governmental, political, social, and
technological nature.
External Currents, Trends, and Forces
According to Diana Olick of CNBC, millennials are delaying life choices that drive homeownership such
as marriage and, as a result, have the lowest rate of homeownership of their age group in history
(2016). Also, recent interest rate hikes by the Federal Reserve are increasing housing costs, which is
pricing out some who have been planning to purchase a home (Olick, 2016).
Although it is still early to make a completely accurate analysis, President Trump’s plans to cut both
corporate taxes and business regulations will potentially result in earnings boosts for American
corporations including Masco (Pisani, 2016). His expansive infrastructure proposal may also benefit
building product manufacturers such as Masco on a more direct level in that it enlists the aid of said
manufacturers to provide the materials necessary to improve the infrastructure (Pisani, 2016).
As consumers increasingly use the Internet and mobile technology to research home improvement
products, Masco will have to create an e-business strategy in order to keep up with these modified
consumer preferences (Masco Corporation, 2016a). Because developing such a strategy requires
significant resources and will inevitably instigate conflicts of interest with existing distribution channels,
Masco’s success or failure with the strategy will have a substantial impact on its market share and its
relationships with customers and suppliers (Masco Corporation, 2016a).
Foreign suppliers and the risks associated with differences in currency and shipping and delivery laws
and regulations are forces that constantly affect Masco, especially given its current status as a
multinational corporation and its vision related to international dominance in its industry (Masco
Corporation, 2016b). Additionally, the costs of commodities used to manufacture Masco’s products as
well as their limited supply can have material adverse effects financially that make it difficult to
monitor strategic progress (Masco Corporation, 2016a).
At any rate, Masco must stay alert and constantly course correct because, given that the ever-shifting
business landscape has been rendered even more unpredictable due to the USA’s new government
administration, nearly all of the described currents, trends, and forces recognized today are tentative
at best.

Competitive Analysis
The most significant direct competitors of Masco Corporation – companies that compete with Masco in
more than one of its product segments – include Patrick Industries, Inc., a manufacturer of component
products and distributor of building products and materials for the recreational vehicle and
manufactured housing industries; Bassett Furniture Industries, Inc., a retailer, manufacturer and
marketer of branded home furnishings; RJD Green Inc., a holding company that, via its subsidiaries, is
engaged in manufacturing for the retail and wholesale distribution of kitchen and bath builder
products; and Capstone Systems Inc., a seller of kitchen sinks and kitchen cabinets (Competitors,
2017).
With respect to Masco’s product segments, it faces competition in each both domestically and
internationally (Masco Corporation, 2016a). Major cabinetry competitors include American
Woodmark Corp., Fortune Brands Home and Security, Inc. and Elkay (Masco Corporation, 2016a).
Plumbing product competitors include American Standard Brands, Grohe, Kohler Co., and Spectrum
Brands Holdings, LLC (Masco Corporation, 2016a). Benjamin Moore, Glidden, Olympic, PPG, Sherwin-
Williams, and Zinsser comprise its primary competitors in its decorative architectural segment (Masco
Corporation, 2016a). Finally, regarding its other specialty products, which mainly involve windows
and doors, Jeld-Wen, Marvin, Pella, and Anderson are its fiercest competitors (Masco Corporation,
2016a).
Masco leads every one of its direct competitors in revenues, net income, market capitalization, and
number of employees by a wide margin (Competitors, 2017). With that said, Masco recognizes that it
faces significant competition in each of its segments; in fact, it is only a market leader in terms of
market share in its plumbing products segment (CSIMarket, 2017). As a result, marketing its well-
known brands to emphasize quality differentiation and pursuing innovation to pair quality with
unmatched utility are of paramount importance (Masco Corporation, 2016a).
Masco Corporation is different from other organizations primarily because of its relatively long and
storied history, its strong and recognizable brands, and its enhanced ability to develop and introduce
innovative new products due in part to its influence in several industries (Masco Corporation, 2016).
Masco can continue to utilize this uniqueness to its advantage, improving its strategic competitiveness
by maintaining its strong brands and the strong relationships it has with its customers because of brand
loyalty and an appreciation for the role the company has played over its almost nine decades of
history. Moreover, Masco can take advantage of its superior financial capabilities relative to its
competitors by effectively using research and development spending to innovate in not only each of
its four business segments, but in its operation and distribution strategies as well (Masco Corporation,
2016).
On a 5-point scale of relative importance that includes the options of Low, Medium Low, Medium,
Medium High, and High, the threat of new entrants is a Low worry for Masco because, in order to
compete in the industry, new competitors must overcome significant barriers such as government
regulations and substantial initial investments (Mind Tools…, n.d.). Substitute products, on the other
hand, constitute a Medium concern because product features are largely imitable, and patents
covering them are often improved upon or circumvented by competitors that make changes that are
insignificant cost-wise yet significant in terms of consumer perception (Mind Tools,… n.d.). To compete
more effectively, differentiating through brand reputation and sustainably drawing out the full
potential of said brands is paramount (Masco Corporation, 2016a).
The advent of mobile technologies has altered consumer purchasing practices in a way that has
increased customer bargaining power to the point where it is a Medium High concern (Masco
Corporation, 2016a). Consumers and suppliers alike have virtually unlimited amounts of information at
their fingertips, which allows them to effect greater changes in both pricing and distribution strategies
(Masco Corporation, 2016a).
For instance, Masco recognizes that it must now accommodate customer demands for state of the art
products on a shorter cycle, which in turn gives suppliers more bargaining power to demand premiums
for hastened logistics (Masco Corporation, 2016a). On top of that, the complexity of its primarily
foreign supply chain and their critical role in Masco’s success as a purchaser of myriad raw materials
highlight its need to simplify without resorting to dealing with the high switching costs involved in the
resource of its products and components to other suppliers (Masco Corporation, 2016a). Because of
such complexities, the bargaining power of suppliers constitutes Masco’s greatest concern and should
be categorized as a High concern (Masco Corporation, 2016a).
Although Masco has a diversified portfolio, smaller and more agile companies are striving to attack
each of Masco’s major segments individually and threatening to use their specialization to out-
innovate in areas such as online and distribution strategies (Masco Corporation, 2016a).
Diversification helps reduce the overall risk of competitors to Masco; however, competition is intense
across every one of its product segments and thus constitutes a Medium High concern (Masco
Corporation, 2016a). To effectively counteract such intense competition, Masco must redouble its
efforts with respect to securing the domination of its leading brands while covering the weaknesses of
its more obscure brands, using its superior financial influence through strategic initiatives backed up by
research and development to out-innovate its competitors (Masco Corporation, 2016a).
Masco Corporation adds value to customers via receiving raw materials from suppliers, manufacturing
them into useful home building products, and selling them to retailers or individuals through its
subsidiary dealers (Masco Corporation, 2017a). With that said, Masco could create more value
through the technology development and procurement aspects of its value chain by further minimizing
its transaction costs – time and money, in particular (Mind Tools…, n.d.).
More specifically, it takes several clicks from Masco’s homepage to come into contact with the
particular products its brands offer (Masco Corporation, 2017g). To maintain its competitive edge,
Masco must implement an e-business strategy that makes life as easy as possible for the consumer,
reducing the number of steps it takes to both obtain information and make a purchase if necessary
(Mind Tools…, n.d.).
To reduce costs and relay those savings to its customers, Masco has formed relationships with suppliers
located in other countries (Masco Corporation, 2016a). Unfortunately, this adds additional
uncertainties and complexities because it involves overseas shipping (Masco Corporation, 2016a).
Nevertheless, switching suppliers is currently not an option for Masco; it would rather maintain its
relationships and find creative ways to cut costs with its partners instead of negotiating with others
(Masco Corporation, 2016a). If Masco can solve the complexity issue with respect to procuring
materials and components, then its ability to compete effectively will improve substantially (Masco
Corporation, 2016a).

Conclusion: Opportunities and Threats

The major opportunities facing Masco Corporation are mainly aligned with its strategy pillars of
leveraging its collective strength and actively managing its portfolio (Masco Corporation, 2016a). For
example, its acquisition of Endless Pools has allowed Masco to further diversify its plumbing product
offerings to include the aquatic fitness category, helping the company to mitigate risk (Masco
Corporation, 2016a). Continuing such diversification whenever the opportunity arises while remaining
faithful to the four major business segments furnishes Masco with myriad opportunities to innovate and
sustain a chief aspect of its competitive advantage (Masco Corporation, 2016a).
Allocating a greater part of Masco’s resources toward its international operations engenders an
opportunity for it to combat its foreign competitors in their markets while simultaneously reducing its
reliance on the domestic market (Masco Corporation, 2016a). If Masco is fully dedicated to becoming
the global leader in building products, then competing directly with smaller businesses all over the
world through its domestic and foreign subsidiaries is key (Masco Corporation, 2016a).
Government policies associated with infrastructure spending and corporate tax cuts and the political
pressure faced by President Donald Trump to enact them in an efficient manner are opportunities for
Masco (Pisani, 2016). The need for its products to improve the country’s infrastructure will increase
sales and the slashing of the corporate tax rate will reduce the federal government’s share of its
profits (Pisani, 2016).
The positive overall industry outlook also provides opportunities for Masco (Google Finance, 2017).
Home prices continue to increase, which may drive demand for products such as cabinets and
windows. Growth in housing turnover indicates a demand increase for repairing and remodeling
(Miller, 2017). The largely untapped market that is millennial homeownership, the strengthening of
long-term fundamentals for all home improvement activities, and the resulting increase in new home
construction are opportunities Masco must capitalize on (Olick, 2016).
The major threats facing Masco Corporation include its operation in a very cyclical area, its high
dependence on Home Depot and Lowes customer-wise as well as on third-party suppliers – many of
whom are located in foreign countries – foreign competitors that drive down costs and sell products to
Masco’s customers for sale as private label merchandise, variability in commodity costs and their
limited availability, risks associated with global operations, and the uncertain political environment
(Masco Corporation, 2016a).
To diminish, deflect, and/or eliminate these threats, Masco can continue to reduce its dependency on
the highly cyclical home construction market via the expansion of its offerings unrelated to said market
(Masco Corporation, 2016a). Masco must make an effort to attract other customers in order to reduce
its dependence on Home Depot and Lowes; changing consumer preferences creates an opportunity to
implement supplier relationships with other companies as well as to implement an e-business strategy
that incorporates a direct-to-consumer distribution channel (Masco Corporation, 2016a). Finally, while
the political climate remains unpredictable, Masco must maintain its hedging strategies to minimize
currency and commodity risks associated with shifting geopolitical and macroeconomic conditions
(Masco Corporation, 2016a).

Internal Environment Assessment

Masco Corporation’s financial, structural, and cultural characteristics – including how it has allocated
and exploited them in the past – and the present demonstrate its internal strength and ability to
maintain alignment in the face of change (Masco Corporation, 2017m).

Core Competencies
Masco Corporation’s discloses that its principal core competency is its superior ability to maintain
strong brands while consistently introducing innovative, state of the art products (Masco Corporation,
2016a). Masco’s diverse portfolio and participation in four different segments of the global building
materials industry – cabinets, plumbing, decorative architectural, and other specialty products – also
differentiate it from major competitors such as American Woodmark Corporation and Sherwin-
Williams, which exclusively compete with cabinet and decorative architectural products, respectively
(Masco Corporation, 2016a).
The company’s positive reputation is based upon its relatively long and storied history, its strong and
recognizable brands, and its enhanced ability to develop and introduce innovative new products due
in part to its influence in several industries (Masco Corporation, 2017a). For nearly a century, Masco
has continuously adapted its understanding of how best to serve its stakeholders (Masco Corporation,
2017m).
By focusing on outstanding corporate citizenship, adhering to high ethical standards, providing
voluntary services and donations through its non-profit foundation, and investing in environmentally-
friendly technologies throughout the entire manufacturing process, Masco has created positive
sustainable relationships with individuals, communities, and the environment (Masco Corporation,
2017e). Coupled with a diverse portfolio of brands, the cultivation of such strong relationships allows
Masco to in turn cultivate an advantage in serving its customers, offering unique value through higher
degrees of personalization and comprehensiveness relative to its competitors (Masco Corporation,
2016b).
Apart from its reputation, the competitive positions it holds in all four of its business segments as well
as its status as a perennial industry leader demonstrate that its core competencies facilitate its unique
prowess in designing, manufacturing, and distributing branded home improvement and building
products (Masco Corporation, 2016a). Masco’s core competencies of brand recognition, innovation,
and diversification are, when dealt with together, durable and difficult to imitate and appropriate
simply because the company not only constitutes such a broad and influential presence in each sector
it participates in, but is largely more financially capable than its competitors to build on its existing
presence as well (Masco Corporation, 2016a).
Now, although Masco’s core competencies are durable, that does not mean that they are invulnerable.
Sustainable competitiveness depends upon Masco’s ability to successfully maintain its relationships with
major customers, implement growth strategies, enter new geographic areas, develop a successful e-
business strategy, maintain its strong brands, manage its cost structure, accommodate short life cycles
for its products, and develop and innovate new and existing products (Masco Corporation, 2016a).
None of these necessary actions are certain to be executed, and any failure puts Masco in a
precarious position (Masco Corporation, 2016a).
Because the company is incorporating lean principles by executing its new Masco Operating System
methodology, it can allocate a greater portion of its resources toward bolstering its strengths and
weaknesses (Masco Corporation, 2016a). Unfortunately, trade-offs have occurred and will likely
continue to occur as the company fully embraces said methodology. For example, business
consolidations and system implementations have led to the closing of several unnecessary plants and,
as a result, headcount reductions (Masco Corporation, 2016c). Overall, this downsizing is a necessary
evil in that it primes Masco for both enhanced competitiveness in the present and long-term growth in
the future (Masco Corporation, 2016c).
Masco Corporation’s structure and culture have together comprised a strong foundation in which to
execute said core competencies.
Its legal structure is that of a C Corporation (Masco Corporation, 2017c). The company chose to
incorporate in Delaware because of the extensive precedents and flexible corporate statutes relative
to other states (State of Delaware, 2017).
Masco currently employs a divisional organizational structure because its subsidiaries essentially
operate autonomously (Gilani, n.d.). More specifically, Masco’s center-led model aligns its corporate
structure directly to its overarching strategy; greater decision-making is delegated to its business units,
reducing the inefficiencies associated with its previously more centralized model while increasing both
its flexibility and its ability to lower costs (Masco Corporation, 2016a).
Masco has reorganized in the past in order to account for its growth and seems capable of continuing
to implement structural changes (Masco Corporation, 2017m). To elaborate, it was not originally
structured as a corporation, but rather as a sole proprietorship (Masco Corporation, 2017m).
Additionally, all aspects of the business were centralized back when its core competency was
automotive part manufacturing (Masco Corporation, 2017m). As it continued to grow and diversify its
assets, it became a large holding company with numerous subsidiaries and began utilizing a form of
the divisional organizational structure that it uses today (Masco Corporation, 2017c).
Evidence exists that Masco has changed its culture at various points in its history (Masco Corporation,
2017m). One such change that is still underway involves its shift toward greater diversity at all levels
of the organization (Masco Corporation, 2017c). In fact, Masco hopes that introducing varied
perspectives will strengthen the company and inform it of any weaknesses in its strategic content
and/or process that may very well have been ignored by a more homogeneous group of employees
(Masco Corporation, 2017e). Such a culture shift conveys that Masco is a forward-thinking and
progressive organization, which also indicates its willingness to effect cultural changes in the future
(Masco Corporation, 2017c).
Masco strives to deliver top business performance by setting high standards at the executive level that
permeate the entire organization and focus on three aspects of leadership: people, decisions, and
results (Masco Corporation, 2017i). The company develops the character and personality leadership
traits of its employees via its people leadership standards, which include efforts to develop and train
individuals, constantly improve communication, and build effective teams in the presence of leaders
and mentors (Masco Corporation, 2017i).
Masco employs the marketing concept by utilizing its decision leadership paradigm to achieve
strategic agility (Pride & Ferrell, 1999). Due to its concentration on strengthening comprehensive
business acumen, it constantly repositions itself for success through innovation and portfolio
management, thus enhancing its ability to give customers what they desire while maintaining financial
success (Masco Corporation, 2017i).
Masco fosters a learning organization, incorporates the “plan, do, study, act” approach, and engages
employees in strategic leadership management by exposing every employee to all three of the
aforementioned aspects of leadership (Scholtes, 1997). More specifically, it develops individuals,
transforming them into genuine Masco employees (Masco Corporation, 2017i). Afterward, methods to
increase decision quality are implemented, such as the never-ending process of developing a
comprehensive business acumen (Masco Corporation, 2017i). Once its employees prove competent,
they are empowered to make decisions and manage execution to optimize results (Masco
Corporation, 2017i). If outcomes are subpar, then activities from the decision leadership facet are
adjusted accordingly and the execution process starts up again (Masco Corporation, 2017i).
Because these fundamental leadership expectations are meant to be enforced throughout the entire
organization – at Masco Corporation and all of its operating companies – subsidiaries have a secure
foundation from which they can align and modify their strategy to that of the parent company. In
other words, in addition to structural and organizational changes, Masco seems equally capable of
successfully implementing strategic changes (Masco Corporation, 2017b).
Concerning whether or not managers are respected and effective, many disapprove of the current
management, often mentioning that they do not care about employees as much as the former
managers used to. Although the sample size is small (89) and subject to voluntary response bias, 60%
of current and former part-time and full-time Masco employees approve of CEO Keith J. Allman
(Glassdoor, 2017).
The leadership standards discussed give employees plenty of motivation and opportunities to change,
encouraging collaboration and accountability via their accompanying activities. With that said, the
autonomy inherent in Masco’s divisional structure and the fact that the organization operates globally
may hinder the assimilation of each subsidiary into one unifying culture. Another possibility is that
Masco has a knowing-doing gap of its own because, even though it communicates a clear strategy for
developing into a learning organization, knowledge of said strategy is not applied across all divisions
(Pfeffer & Sutton, 2000).
Again, employee sentiment reveals that the current management has been ineffective in terms of
communicating strategy, which does suggest that Masco’s structure and/or knowing-doing gap may
inhibit the culture of leadership on which it purportedly bases its entire organization; knowledge of
leadership standards and the learning opportunities accompanying their implementation may not be
taken advantage of to the same degree at all levels of the organization after all (Pfeffer & Sutton,
2000). Nevertheless, such difficulties can be overcome as long as Masco improves on communicating
its strategy, truly involving all employees instead of only paying lip service to the notion (Glassdoor,
2017).
There is evidence that Masco rewards performance and gives employees opportunities to grow and
advance; however, this primarily seems to be the case after one becomes a permanent employee.
Several reviews from current and former employees who have worked at Masco for over a year
mentioned that there is an increasing focus on nurturing talent for leadership roles and offering
competitive salaries. Those who have just begun working there, on the other hand, have decried the
lack of competitive pay. Overall, it seems that as soon as one achieves a permanent positon and
proves their loyalty to the company, superior performance is rewarded on a more frequent basis
(Glassdoor, 2017).

Financial Situation
Masco shifted to a center-led model in order to more closely align its corporate structure to its
strategy, dividing itself into four business segments (Masco Corporation, 2016a). Masco’s myriad
brands render its cost structure more complex than its smaller, specialized competitors (Masco
Corporation, 2016a). Nevertheless, the company continues to incorporate lean principles into every
aspect of its operations, helping it improve its business agility and implement strategic initiatives as
quickly or even quicker than its competitors; it certainly possesses the financial resources to do so
(Masco Corporation, 2016a).
Five of the most significant financial ratios for Masco Corporation are its net margin, current ratio,
long-term debt ratio, earnings per share, and asset turnover ratio. These are of primary importance
because they provide insight into Masco’s financial health by covering its profitability, liquidity,
leverage, market value, and asset efficiency.
Masco’s net margin shows what percentage of its revenue composes its net income: $355 million in net
income / $7,142 million in revenue = 4.97%, which is higher than the industry median of 4.3% (Guru
Focus, 2017). Thus, relative to competitors, a greater percentage of Masco’s revenues translate to
profits, which is a strength for the organization (Guru Focus, 2017).
Masco’s current ratio conveys how capable the company is in paying off its short-term obligations:
$3,328 million in current assets / $2,506 million in current liabilities = 1.33, which, although lower
than the industry standard of 1.68, still indicates that the company is financially healthy (Guru Focus,
2017). Because of this – and the fact that one’s current ratio is ever-changing – the current ratio must
be considered as a relatively neutral factor for the organization (Guru Focus, 2017).
Masco’s long-term debt ratio communicates how much of its assets are financed with loans and other
long-term financial obligations: $2,418 million in long-term debt / $5,680 million in total assets =
0.43 (Guru Focus, 2017). The ratio had increased from 0.29 to 0.50 over the last decade, which
means that, despite utilizing a greater proportion of debt overall, Masco has more recently been
using progressively less debt to grow its business (Guru Focus, 2017). With that said, Masco’s efforts
to significantly cut costs and reduce debt have not yet made a noticeable impact (Masco Corporation,
2017c). Thus, this metric is one of Masco’s current weaknesses (Guru Focus, 2017).
Masco’s earnings per share represents the amount of earnings per outstanding share of stock: ($355
million in net income – 0 shares in preferred stock) / 341 total shares outstanding = 1.04 in earnings
per share (Guru Focus, 2017). Again, only historical data was given for this metric. From 2008 to
2012, Masco had a negative earnings per share because of its net losses during the financial crisis
(Guru Focus, 2017). The company has bounced back; however, its earnings per share has decreased
from its value of 2.38 in 2014 (Guru Focus, 2017). Therefore, this result is a neutral factor for the
organization (Guru Focus, 2017).
Finally, Masco’s asset turnover ratio shows how quickly it turns over its assets through sales: $7,142
million in revenue / $6,444 million in average total assets = 1.11 (Guru Focus, 2017). Results from the
last ten years show that Masco’s asset turnover ratio has gradually gotten higher, which means that its
assets are becoming more efficient in generating sales (Guru Focus, 2017). Thus, this result is a
strength of the organization (Guru Focus, 2017).
From a study of the organization’s financial statements, one can conclude that Masco must continue to
cut costs by simplifying its organizational structure – primarily the complexity of its international
supply chain (Masco Corporation, 2017c). If freed up, debts that have been incurred because of such
complexities can instead finance research and development to drive earnings growth (Zacks Equity
Research, 2016).

Conclusion: Strengths and Weaknesses

The major strengths of Masco include its overall financial health and its superior financial resources
relative to competitors; diverse, yet unified brands; strategic agility; commitment to diversity; ethical
standards; and relationship to the community (Masco Corporation, 2016b). Again, hiring those with
diverse perspectives, helping the community through its foundation to the best of its ability, and
managing its portfolio of assets in a way that is both fiscally responsible and conducive to innovation
– taking into consideration the relevant internal and external factors – will ensure that the company
exploits these strengths while staying committed to its guiding stars (Masco Corporation, 2016b).
The major weaknesses of Masco include its excessive use of debt, lack of an e-business strategy,
inadequate use of strategic communication concerning its leadership standards across the entire
organization, insufficient incentives and rewards for newer workers (which may increase employee
turnover), and complex international supply chain (Masco Corporation, 2016a).
To eliminate, diminish, and/or deflect these weaknesses, Masco must continue cutting unnecessary costs,
leverage the freed up cash to implement an e-business strategy that facilitates the online purchasing
process, work to combat the knowing-doing gap if one exists and improve the frequency and quality
of organization-wide communication, offer rewards and incentives for performance for newer
employees, and both recommit to and renegotiate terms with existing suppliers (Masco Corporation,
2016a).

Strategies in Action at Masco Corporation

Masco Corporation formally delineates current long-term objectives for each of its business segments
as well as for the company as a whole.
In Masco’s plumbing products segment, its long-term objectives include achieving the three-year goals
of a 4-6% compound annual growth rate in sales and growth in its operating margin percentage to
somewhere within the high teens via pursuing the strategic priorities of extending its leadership in
North American plumbing, expanding its brand categories, and growing both organically and
inorganically (Masco Corporation, 2016d).
In Masco’s decorative architectural products segment, its long-term objectives include accomplishing
the three-year goals of a 6-9% compound annual growth rate in sales and growth in its operating
margin percentage to approximately 18% via pursuing the strategic priorities of extending its
customer leadership position, growing market share in the PRO paint segment, and leveraging the
KILZ and Liberty brand families (Masco Corporation, 2016d).
In Masco’s cabinetry products segment, its long-term objectives include accomplishing the three-year
goals of a 4-7% compound annual growth rate in sales and growth in its operating margin
percentage to somewhere within the low to mid-teens via pursuing the strategic priorities of profitably
recovering market share with its KraftMaid and Merillat brands, executing a turnaround of Builder
Direct, and achieving margin improvement targets (Masco Corporation, 2016d).
In Masco’s windows and other specialty products segment, its long-term objectives include achieving
the three-year goals of a 9-11% compound annual growth rate in sales and growth in its operating
margin percentage to approximately 10-13% via pursuing the strategic priorities of extending
Milgard’s leadership position in the western portion of the U.S., driving further geographic expansion
with said brand, and extending UK Window Group’s leadership position (Masco Corporation,
2016d).
Pursuing and accomplishing the aforementioned strategic priorities and three-year goals in each of
Masco’s segments will thus facilitate the accomplishment of its comprehensive long-term financial
objectives: achieving a 7% compound annual growth in revenue, a 15% compound annual growth in
operating profit, and a 26% compound annual growth in earnings per share (Masco Corporation,
2016d).
Masco Corporation also possesses long-term objectives concerning corporate responsibility and
sustainability in the areas of community outreach and the environment (Masco Corporation, 2012). The
company strives to consistently exceed the amount it contributed to charity in the previous year and,
although it is primed for increased production, maintain yearly reductions in both CO2 intensity (10%
below its 2007 baseline) and waste intensity (20% below its 2007 baseline) (Masco Corporation,
2017e).
The company formally describes the strategy it is using to accomplish its long-term objectives and,
therefore, execute on its mission and achieve its vision as a three-pillar, center-led model (Masco
Corporation, 2016a). Such a strategy implements a leaner operating model, delegating greater
decision-making to its business units, reducing the inefficiencies associated with its previously more
centralized model, and increasing both its flexibility and its ability to lower costs (Masco Corporation,
2016a).
The three major pillars of Masco’s center-led model include driving its businesses to their full potential,
leveraging opportunities across its businesses, and actively managing its portfolio (Masco Corporation,
2016a). In driving its subsidiaries to their full potential, Masco has introduced new products in
adjacent markets with its core businesses using a related diversification strategy (David, 2010).
In leveraging opportunities across its businesses, Masco has executed a product development strategy
to innovate its existing brands as well as a market penetration strategy to seek greater market share
with its innovations (David, 2010). Moreover, Masco has incorporated strategic sourcing methods to
gain greater control over its suppliers (Masco Corporation, 2016a).
Lastly, in actively managing its portfolio, Masco has pursued several strategies.
It has utilized divestiture to sell off assets no longer suitable for the company when it spun-off its home
insulation units and in turn created TopBuild Corp., retrenchment in order to regain competitiveness via
consolidating businesses and implementing systems resulting in the closing of several unnecessary
plants and headcount reductions, horizontal integration and market development by acquiring
international competitors – its acquisition of Evolution Manufacturing in the United Kingdom, for
example – to expand its offerings into new geographic areas, and unrelated diversification by
increasing its product line with unrelated offerings when it acquired Endless Pools and expanded its
product offerings and distribution channels into the aquatic fitness category (Masco Corporation,
2016c).
Masco is exploiting these various strategies because they are necessary if the organization truly
desires to achieve its vision “…to be recognized as the global leader in the innovation and marketing
of quality building products and services” (Masco Corporation, 2016b). More specifically, taking into
consideration its current position relative to its vision, Masco must pursue growth while cutting out
corporate waste; thus, by pursuing the aforementioned strategies, the company is facilitating its
efforts toward accomplishing said vision (Masco Corporation, 2016b).
The results of these strategies have been positive so far. According to CEO Keith J. Allman,
comparatively strong results in 2015 demonstrated by exceeding profitability targets in Masco’s
cabinetry product segment; achieving record sales, profits, and awards for innovations in its plumbing
product segment; and increases in both overall operating margin and cash flow generation prove that
its strategies are working (Masco Corporation, 2016a).
Via introducing its lean Masco Operating System Methodology and delegating greater decision-
making to its business units, Masco is killing two birds with one stone, so to speak, reducing its
weaknesses by removing the inefficiencies that led to excessive corporate waste of valuable time and
resources and enhancing its strategic agility to combat smaller, more aggressive competitors (Masco
Corporation, 2016a). Additionally, it is optimizing its financial strength internally and seizing
opportunities externally, implementing a product development strategy in existing and adjacent
markets both domestically and internationally in order to achieve its market development and market
penetration strategies (Masco Corporation, 2016c). Finally, by implementing strategic sourcing
methods, Masco is gaining greater control over its suppliers and mitigating the threats posed by their
bargaining power (Masco Corporation, 2016c).
In light of this information, there undoubtedly seems to be an alignment between Masco Corporation’s
vision, mission, objectives, and strategies. CEO Keith J. Allman’s decision to implement the current
center-led model was made with the purpose of aligning every facet of the company and of ensuring
that every subsequent decision will be made in accordance with strategies that facilitate the execution
of its mission to achieve long-term objectives and, ultimately, fulfill its vision (Zacks Equity Research,
2016). This conscious choice demonstrates to stakeholders the company’s earnestness in relating its
long-term objectives to its current strategies as well as to its guiding stars (Masco Corporation,
2017h).
Masco’s three-pillar strategy of driving its businesses to their full potential, leveraging opportunities
across its businesses, and actively managing its portfolio harmonizes with its core competency of
maintaining comparatively strong brands while consistently introducing innovative, state of the art
products (Masco Corporation, 2016c). In other words, the various activities used to implement each
pillar of its overarching strategy fully exploit its core competency (Masco Corporation, 2016c).
Masco explains the operational trade-offs it is making due to the implementation of its strategies. The
company understands that, by delegating greater decision-making power to its subsidiaries, it is
sacrificing centralized control (Masco Corporation, 2016c). Moreover, by focusing on aggressive
growth and implementing company-wide changes to keep up with shifting consumer preferences, it is
allocating resources toward initiatives that may fail instead of allocating them toward existing brands
(Masco Corporation, 2016c). As a result, said brands may lose market share because of a lack of
resources to keep up with competitors’ innovations (Masco Corporation, 2016c).

Strategy Analysis and Choice

Going forward, Masco’s recent strategic transformations have granted it a means to reduce the
significance of each of Porter’s Five Forces and have ultimately placed it on the path toward greater
success (Mind Tools…, n.d.). Nevertheless, strong forces working against Masco must still be dealt with.

Strategic Alternatives
Masco’s strengths and opportunities can be matched up in several ways to eliminate, deflect, and/or
diminish its weaknesses and threats.
Masco can leverage its collective strength in actively managing its portfolio as well as its abundant
financial resources relative to competitors in order to pursue the market development strategy of
allocating a greater part of its resources toward its international operations (David, 2010). Using said
internal strengths allows Masco to diminish the threat posed by foreign competitors while
simultaneously capitalizing on an opportunity to reduce its reliance on the domestic market (Masco
Corporation, 2016a).
The company can also leverage its portfolio management expertise to reduce the threats of its
dependency on the highly cyclical home construction market and its exposure to commodity and
political risk (Masco Corporation, 2016a). Pursuing an unrelated diversification strategy – expanding
its product offerings and distribution channels into the aquatic fitness category via the acquisition of
Endless Pools, for example – is a means by which Masco will reduce its cyclical nature (Masco
Corporation, 2016a). Furthermore, Masco will minimize the threats of currency and commodity risks as
long as it consistently adapts its hedging strategies as a part of its broader portfolio management
strategy pillar (Masco Corporation, 2016a).
Masco’s recently implemented center-led model calls for decentralizing the decision-making process
and incorporating a lean methodology (Masco Corporation, 2016a). These actions have enhanced
Masco’s strategic agility and decreased its dependence on debt, respectively (Masco Corporation,
2016a). Maintaining a strategy to sustain those strengths will continue to mitigate corporate waste
and free up time and money that can be allocated toward both exploiting the opportunity of
strengthened long-term fundamentals for all home improvement activities and eliminating the
weakness of its lack of an e-business strategy (Masco Corporation, 2016a).
Masco’s implementation of an e-business strategy will advance the company toward its vision of
becoming a true global leader, thus enabling it to not only combat the threat of ever-shifting global
consumer preferences related to conducting research and making purchases, but to expand its sales to
include direct purchases by smaller companies and individuals as well (Masco Corporation, 2016a). In
other words, Masco’s increasing distribution channels and incorporating forward distribution to attain
greater control over them will reduce its dependence on retailers such as Home Depot and Lowe’s,
driving down costs by eliminating middlemen (Masco Corporation, 2016a). Masco could then pursue a
low-cost leadership strategy, in turn allowing it to more aggressively pursue a market penetration
strategy that diminishes the threat of substitute products (David, 2010).
Masco must also take advantage of its strength in diversity when pursuing its market development
strategy (Masco Corporation, 2017c). To elaborate, Masco’s commitment to diversity may facilitate its
efforts in negotiating with suppliers and distributors overseas (Masco Corporation, 2017c). Whenever
culturally diverse employees possess ties to and/or insider knowledge of nations in which a supplier
and/or potential market reside, their superior understanding may be the key to improving relations
with and hence diminishing the threat associated with the complexity of Masco’s international supply
chain (Masco Corporation, 2016a). On a related note, its financial strength can also be leveraged to
acquire said suppliers, allowing it to implement changes conducive to its success directly instead of
spending time, energy, and money negotiating (Masco Corporation, 2016a).
Cultivating Masco’s strength in diversity throughout its organizational structure can also provide new
perspectives on workplace communication methods, which may very well diminish its weakness of
leaders’ collective inability to communicate the company’s overarching strategy to lower-level workers
and lower-level workers’ collective inability to communicate the negative impact they experience
because of a lack of introductory incentives to leaders (Glassdoor, 2017).
Masco must again utilize its financial influence to continue implementing its product development
strategy (David, 2010). The company identifies its ability to consistently introduce innovative, state of
the art products as a core competency. Therefore, Masco can further diminish the threat of substitutes
by researching ways in which to innovate its existing products and possibly invent related products as
part of its related diversification strategy (Masco Corporation, 2016a).

Strategy Choice and Rationale

Masco should continue to implement its market development strategy because it diminishes the threat
of smaller foreign competitors and provides a means through which the company can incorporate its
e-business initiatives, thus eliminating both an internal weakness associated with a fragmented, difficult
online customer experience and a significant threat associated with failing to keep up with ever-
changing and diverse global consumer preferences (Masco Corporation, 2016a).
Because each of Masco’s product segments are fiercely competitive and much of the company’s
dominance involves its brand equity, it would benefit the company to continue pursuing a market
penetration strategy, especially if it can drive down costs through operational efficiency improvements
as a result of the implementation of its e-business strategy, for example (Masco Corporation, 2016a).
As a sizable holding corporation, portfolio management serves as one of the three major pillars of
Masco’s overarching strategy (Masco Corporation, 2016a). To capitalize on its newfound strength of
strategic agility, Masco should harness that strength by continuing to utilize divestiture, related
diversification, and unrelated diversification when appropriate, exploiting portfolio management to
ensure that its offerings are constantly aligned with its mission and vision (David, 2010).
Pursuing these strategies utilizes leverage to help Masco gain and sustain a competitive advantage
because they all help the company to achieve differentiation via optimizing the company’s core
competency of maintaining comparatively strong brands while consistently introducing innovative, state
of the art products (Mind Tools…, n.d.). It is indeed difficult to determine Masco’s so-called area of
highest leverage; nonetheless, Masco’s extreme emphasis on aligning all strategic actions with its core
competency and guiding stars will reveal which small changes create the largest impact (Masco
Corporation, 2016).
To clarify, Masco should maintain its current strategies. With that said, in addition to those strategies,
pursuing the new strategies of low-cost leadership, backward integration, and forward integration
can match the strength of superior financial resources with the opportunity to differentiate by price
leadership, the weakness of a lack of an e-business strategy, and the threat of powerful suppliers
(David, 2010). More precisely, Masco can utilize its financial resources to acquire and assimilate
suppliers, thus reducing their bargaining power and lowering costs (Mind Tools…, n.d.). Creating an e-
business strategy and developing a channel in which to sell directly to individual customers and
contractors as opposed to retailers will allow Masco to assume more control over distribution and
lower costs even further. Masco can then pass these reduced costs onto consumers and differentiate
themselves further from competitors via lower prices (Mind Tools…, n.d.)
As explained in the Competitive Analysis section, the threat of new entrants is a relatively small worry
for Masco because, in order to compete in the industry, companies must overcome significant barriers
such as government regulations and substantial initial investments (Masco Corporation, 2016a). In
contrast, industry rivalry, the threat of substitute products, and the bargaining power of buyers and
suppliers all play important roles in Masco’s strategic decisions (Masco Corporation, 2016a).
Fortunately, as the SWOT analysis demonstrates, Masco’s strengths and opportunities can, in fact,
synergize to undermine their impact (Masco Corporation, 2016a).
The center-led model and its three strategic pillars create a reinforcing feedback process of success
because, by leveraging opportunities across its businesses and retaining the flexibility to exploit the
aforementioned sub-strategies when appropriate, Masco can in turn drive its businesses to their full
potential (Masco Corporation, 2016a). This reinforcing feedback process has propelled and should
continue to propel Masco forward on an increasing trajectory of success (Masco Corporation, 2016a).

Strategy Implementation: Alignment

Once again, Masco Corporation is currently pursuing a three-pillar strategy, which includes driving its
businesses to their full potential, leveraging opportunities across said businesses, and actively
managing its portfolio (Masco Corporation, 2016a).
In driving its subsidiaries to their full potential, Masco is executing a product development strategy to
innovate its existing brands and a market penetration strategy to seek greater market share with said
innovations (David, 2010). In leveraging opportunities across its businesses, Masco is introducing new
products into adjacent markets with its core businesses using a related diversification strategy and
existing products into new geographic areas with its market development strategy (David, 2010).
Finally, in actively managing its portfolio, Masco continues to pursue several strategies: It utilizes
divestiture to sell off assets no longer suitable for the company, retrenchment in order to regain
competitiveness, and horizontal integration and market development in tandem via acquiring
international competitors to expand its offerings into new geographic areas (David, 2010).
From this point on, Masco should maintain its aforementioned strategies because, not only do the
results of implementing these strategies seem positive so far, but together they serve as a means
through which the company can execute its mission in harmony with its core competency of maintaining
comparatively strong brands while consistently introducing innovative, state of the art products (Masco
Corporation, 2016c).
Based on SWOT analysis findings, it is recommended that Masco pursue the strategic alternatives of
low-cost leadership, backward integration, and forward integration from this point on as well (David,
2010). Integrating certainly involves risk, and Masco will have to be especially careful about aligning
its acquisitions’ practices with its own and avoiding competition with its customers (David, 2010). The
threats associated with being heavily dependent on third-party foreign suppliers and on two primary
customers, however, outweigh the risks involved with incorporating these strategies, thus indicating a
pressing need to pursue them (Masco Corporation, 2016a). Obtaining greater control over its
complex supply chain, reducing its dependence on retail customers, and facilitating its future
implementation of an e-business strategy – which includes selling products directly to consumers –
should grant Masco the ability to lower its prices and, in turn, help the company to distinguish itself
further from its fierce competition (Masco Corporation, 2016a).
Masco’s status as a sizable holding company affords it a relatively superior capability in terms of
pursuing multiple strategies (Masco Corporation, 2016a). Nevertheless, a distinction must be made:
While the strategies related to the first two pillars of its overarching strategy must be maintained
unabated to successfully execute its mission and sustain its competitive position, several strategies
related to the pillar of actively managing its portfolio – divestiture, retrenchment, backward
integration, forward integration, and horizontal integration – are also worth pursuing when
appropriate but do not require constant execution because of their comparatively substantial
structural impact on the firm (David, 2010).
Masco Corporation has the right leaders who possess the right attitudes, the right incentives, and the
necessary resources to execute the new strategy.
President and CEO Keith J. Allman has displayed courage and competence in developing the
strategies that have provided the foundation for Masco’s current direction (Armstrong & Dillon, 2016).
In terms of incentives, Masco’s executive compensation program incorporates best practices that align
executive officers’ interests with the long-term interests of stockholders: long-term equity incentives,
long-term performance programs, the ability to clawback incentive compensation, a minimum level of
executive stock ownership, a lack of contractual termination agreements, a hedging and pledging
prohibition, and an annual compensation risk evaluation (Masco Corporation, 2016e). In short, Masco’s
financial capabilities and four business segments comprise the necessary resources to execute its
strategies and edge closer toward its vision (Masco Corporation, 2016a).
Masco hopes that introducing varied perspectives will strengthen the company by informing it of any
weaknesses in its strategic content and/or process and helping employees with differing learning
styles and work ethics to maintain the right attitudes (Masco Corporation, 2017c). As mentioned
previously, the company currently expresses such diversity at the top through the unique educational
and experiential backgrounds of its Leadership Team and Board of Directors, which include
involvement in the automotive, banking, education, energy, finance, government, and realty industries.
(Masco Corporation, 2017b).
Unfortunately, a gap exists in strategic communication. More specifically, lower-level employee
sentiment suggests that Masco’s structure and/or knowing-doing gap may inhibit the culture of
leadership on which it purportedly bases its entire organization and that knowledge of leadership
standards and the learning opportunities accompanying their implementation may not be taken
advantage of to the same degree at all levels of the organization after all (Pfeffer & Sutton, 2000).
Nevertheless, if the new strategies are to be implemented successfully, then such difficulties can be
overcome as long as Masco truly involves all employees instead of only paying lip service to the
notion (Glassdoor, 2017).
Again, evidence reveals that Masco rewards performance and gives employees opportunities to grow
and advance; however, this primarily seems to be the case after one becomes a permanent employee
(Glassdoor, 2017). Several reviews from current and former employees who have worked at Masco
for over a year mentioned that there is an increasing focus on nurturing talent for leadership roles and
offering competitive salaries; new employees, however, are unhappy with the lack of competitive pay
and incentives, which negatively impacts their attitudes and their motivation to learn and benefit from
training (Glassdoor, 2017).
Overall, if Masco can improve its organization-wide strategic communication and create better
incentives for new employees, then the company can truly be said to possess the right people with the
right attitudes and incentives necessary to optimize the utility of its resources (Glassdoor, 2017).
Masco self-reported culture, values, and unique qualities are indicated in its vision of a desire “…to
be recognized as the global leader in the innovation and marketing of quality building products and
services,” the narrative it relays with respect to its role in history and its positive impact on society,
and its focus on corporate responsibility – its people, the community, and the environment (Masco
Corporation, 2016b).
Evidence exists to support the notion that Masco’s self-reported organizational culture is, for the most
part, an actual reality (Masco Corporation, 2017e). The fact that the company has lasted and grown
into a Fortune 500 company over the course of nearly a century, the lack of company scandals over
that extended period, the community-focused endeavors it initiates via the Masco Foundation, and the
constant improvement it has displayed in procuring raw materials from environmentally-friendly
sources demonstrate that, on a macro scale, Masco’s culture has facilitated the company’s success in
implementing strategies to achieve its vision while serving to improve the general welfare of society
(Masco Corporation, 2017e).
Masco’s diverse leadership team has already proven their capability to implement comprehensive
strategic changes for the benefit of the company (Armstrong & Dillon, 2016). The promotion of Keith
J. Allman to CEO has given the company a new lease on life, so to speak, and his implementation of a
center-led model that includes, paradoxically, more decentralized authority via a leaner operating
methodology has enhanced the company’s positions in each of its four business segments (Masco
Corporation, 2016a). Therefore, confidence should be given in Masco leaders’ collective ability to
align its existing culture with the new recommended strategies (Masco Corporation, 2016a).
Even though cultural change is difficult to accomplish – especially with respect to sizable holding
companies such as Masco – the gap between the current culture and the ideal culture is insignificant
and undoubtedly manageable. Driving decision-making to subsidiaries decreased Masco corporate
leaders’ influence in a sense, and a sample of Masco’s workers have even stated that the CEO and
upper-level management must provide better direction to its employees (Glassdoor, 2017).
Fortunately, despite Masco’s expansion and decentralized authority, the company’s commitment to
achieve greater diversity at all levels of the organization indicates that the adjustments necessary are
more apt to be communicated at all levels of the organization to align every brand, company, and
subsidiary with the company’s new and existing strategies (Masco Corporation, 2016a).
In terms of organizational structure, Masco currently employs one that is divisional in that its brands
operate as largely autonomous businesses (Gilani, n.d.).
Strengths associated with this type of structure involve greater decision-making delegated to its
business units, which reduces the inefficiencies associated with its previously more centralized model
while increasing both its flexibility and its ability to lower costs (Masco Corporation, 2016a).
Decentralizing authority also has its share of weaknesses because individual subsidiaries have more
freedom and authority of their own to develop strategies and implement practices that may turn out
to be antithetical to those of its parent company (Gilani, n.d.).
Nonetheless, a divisional structure remains the most effective option for Masco in terms of
implementing strategy in alignment with its culture because it allows the company to maintain a lean
structure and operating system methodology that grants it the resources and flexibility to acquire and
integrate promising divisions/companies/brands both upstream and downstream with respect to its
supply chain and, in turn, reduce the prices of its products relative to competitors (Gilani, n.d.). The
center-led model that delegates greater decision-making to subsidiaries should stay in place;
however, increasing the degree of strategic communication across the entire organization without
relaying specific orders may exploit the divisional structure even further in Masco’s alignment efforts
(Glassdoor, 2017).
If the new strategies of backward integration, forward integration, and low-cost leadership are
implemented – then aside from pricing, purchasing, and distributing – existing current operations,
functional activities, and supportive activities should not require any major adjustments (David, 2010).
Obviously, the company will have to adapt its supply chain to accommodate the acquired suppliers
and distributors – the individual companies involved with the particular resources that the suppliers
and distributors were involved with beforehand must evolve to fully exploit the benefits of assuming
control of them (Bauer, Erdogan, Short, & Carpenter, 2016).
Concerning the corporation as a whole, taking on the role of direct distributor will chiefly necessitate
changes in marketing efforts, accounting, finance, human resources, and customer service functions
(Bauer, Erdogan, Short, & Carpenter, 2016). Controlling suppliers will also necessitate changes in
accounting, finance, and human resources (Bauer, Erdogan, Short, & Carpenter, 2016). Once again,
the main threats with this strategy involves assimilating each newly-acquired company into Masco’s
umbrella, which in turn means that Masco must adjust its strategy to take into consideration their
respective cultures (Masco Corporation, 2016a).
Further, Masco’s refined business units and enhanced flexibility that accompany its organic structure
facilitate such adjustments (Bauer, Erdogan, Short, & Carpenter, 2016). Risks cannot be eliminated;
however, acquiring companies that are existing partners at least brings a level of familiarity to the
table, and the aforementioned structure of Masco is nearly optimal for the implementation of such
strategies (Gilani, n.d.). Therefore, Masco’s leanness, flexibility, and key experience in acquisitions
lend credence to the notion that if the company and its new subsidiaries attempt to adjust their current
strategies and possibly even their cultures in order to achieve alignment, then its current operational
and/or supportive activities will complement and reinforce one another as a system of interdependent
parts in a synergistic manner when the new strategies are implemented (Bauer, Erdogan, Short, &
Carpenter, 2016).
Masco is indeed capable of performing the required alignment to implement the new strategies.
Masco’s leanness, flexibility, and key experience in acquisitions lead one to believe that if the
company and its new subsidiaries attempt to adjust their current strategies and possibly even their
cultures in order to achieve alignment, then its current operations, functional activities, and supportive
activities either do not need adjusting or can relatively easily adjust to maintain the current alignment
that was achieved by the most recent major strategic shift in 2014 (Masco Corporation, 2016a).
The material threat posed by a complex and costly supply chain is an urgent matter; however,
Masco’s strengths and opportunities are mitigating that threat (Masco Corporation, 2016a).
Nonetheless, said material threat will not go away unless Masco effects significant change, and
backward integration is the best choice available given such circumstances as well as Masco’s current
status (David, 2010).
Speaking of current status, financially speaking, all four of Masco’s segments are now profitable, it
has achieved sustained increases in overall operating profit, and total debt has begun to decrease as
well (Guru Focus, 2017). Masco has continued to free up resources while increasing profits; therefore,
the company possesses the financial and other resources it needs to perform the alignment (Masco
Corporation, 2016a).

Strategy Implementation: Action Plan

To implement Masco Corporation’s low-cost leadership strategy, goals it must achieve include making
process improvements to effect a 10% reduction in variable overhead costs for all 18 of Masco’s
subsidiaries by 2020 and a 5% reduction in the price of each subsidiary’s top-selling brand by 2020
(Masco Corporation, 2017k).
To implement its backward integration strategy, Masco must acquire at least one foreign supplier –
one possessing considerable buying power relative to others – within each product segment by 2022
and must in turn reduce overall supplier transaction costs by no less than 20% by 2022 (Masco
Corporation, 2016a). By acquiring greater control over its suppliers and, in turn, its supply chain,
Masco will counteract the costs associated with the acquisitions with the savings it will accrue through
enhanced production capability and, over the long term, further reduce its manufacturing costs per unit
(David, 2010).
To implement its forward integration strategy, Masco must first create a company-wide e-business
platform that enables consumers to purchase products directly from every single one of its subsidiaries
by 2020 (Masco Corporation, 2016a). Moreover, Masco must negotiate with its major buyers – Home
Depot, Lowe’s, and other significant purchasers within a 50-mile radius – and formulate an agreement
wherein they handle logistics and delivery to the consumers who purchase directly from Masco’s e-
commerce platform by 2022 (Masco Corporation, 2016a). By acquiring greater control over the
channels through which it interacts with customers while also maintaining and adjusting current
distributor relationships, Masco will attain greater control with respect to how end users perceive its
products – especially in relation to price (David, 2010).
The aforementioned goals contain specific and measurable criteria. Moreover, given the significance
of the changes implemented and Masco’s capabilities, the following goals should be achievable and
realistic. With that said, because the goals are time bound, the time frame for accomplishing each one
may need to be adjusted based on the progress made by the end of each year. Nevertheless,
Masco’s resources and the strong foundation from which it executes its strategies convey that it is more
than capable of implementing such changes within the originally allotted time frame (Masco
Corporation, 2016a).
Masco has proven in the past that its human and financial resources are more than capable of
executing multiple strategies to positively impact every one of its segments (Masco Corporation,
2017m). Although Masco is currently pursuing several sub-strategies under its three-pillar corporate
strategy, it has clearly adapted to its new center-led model and the economy is working in its favor
(Masco Corporation, 2016a). Therefore, even after taking into consideration Masco’s current activities,
now is the perfect time for it to ramp up its aggressiveness with respect to growth while lowering the
prices of its existing brands to counteract competing brands; the number of goals to accomplish such
growth is purposefully kept low enough to ensure that the company is capable of succeeding and that
resources are not tipped too heavily in any one strategy’s favor (Masco Corporation, 2016a).
The goals are compatible, work synergistically, and fit the corporate-level strategy because in
gaining control over suppliers and distributors, Masco will simplify its value chain and harness the
necessary resources to implement its e-business strategy without cannibalizing its sales and damaging
its existing buyer relationships (David, 2010). As a result of Masco’s newfound control of its cost
structure and supply chain, it will possess greater flexibility, reducing the threats of consumer and
supplier bargaining power while facilitating its provision of superior value to customers via lower
prices (Masco Corporation, 2016a).
On one hand, Masco is a corporate holding company possessing a divisional organizational structure
and delegating decision-making authority to its divisions/subsidiaries; thus, its divisions act as
individual businesses and have departments/functional structures of their own (Gilani, n.d.). On the
other hand, everyone associated with Masco will work synergistically to implement the company’s new
strategies by way of taking action steps and developing performance measures to achieve and
control specific, measurable, attainable, realistic, and time-based sub-goals (Gilani, n.d.).
To effect at least 10% reductions in variable overhead costs and reduce the price of top-selling
brands by 5% by 2020, production departments in every subsidiary must aim to decrease cost per
manufactured unit, increasing operational efficiencies to decrease manufacturing lead time by 10%
and reducing the cost of production supplies by 5% by 2020 (Masco Corporation, 2016a).
To acquire at least one foreign supplier – one possessing considerable buying power relative to
others – within each product segment by 2020, Masco’s parent-company level financial unit must rank
the product segments according to their supplier costs and acquire foreign suppliers in each category
based on the urgency demonstrated by said costs by the end of 2017, 2018, 2019, and 2020,
respectively (Masco Corporation, 2016a). As a result, production units in each subsidiary must take
action to accommodate the increased efficiencies resulting from greater control over the supply chain
and leverage them to facilitate the accomplishment of their aforementioned sub-goals (Masco
Corporation, 2016a).
To implement a company-wide e-business strategy by the end of 2020, Masco’s parent-company
level financial units must negotiate and create a contract with all of its major buyers (those who are
Masco’s top customers and those who hold monopolies within 50-mile radii) regarding the logistical
aspects of its e-business strategy by the end of 2017. Masco’s leaders must relay to all 18 of its
divisions which e-commerce software it plans to utilize, purchase said software, and distribute it to its
divisions by the end of 2018 (Masco Corporation, 2017k).
Each subsidiary’s marketing unit must then catalog its entire inventory and send it to its information
technology unit by the end of 2019. Information technology, marketing, and production units from
each subsidiary must work together to create a coherent design that works synergistically with existing
database systems to effectively promote product offerings and monitor their levels of availability,
which will accomplish the information technology units’ sub-goal of completing website maintenance
for all 19 websites associated with the Masco name prior to the conclusion of 2020 (Masco
Corporation, 2017k).
If all units take said action steps and develop said performance measures to achieve and control said
specific, measurable, attainable, realistic, and time-based sub-goals, then Masco will undoubtedly
make progress toward both its organization-wide strategic goals of driving its businesses to their full
potential, leveraging opportunities across said businesses, and actively managing its portfolio as well
as its vision “…to be recognized as the global leader in the innovation and marketing of quality
building products and services” (Masco Corporation, 2016b).
In order to achieve their goals, Masco’s top-level units will need myriad resources. Of course, time is
always a necessity. In addition to that, money, people, and training are needed to acquire suppliers
and align their practices with those of Masco (Harvard Business School Press, 2005). Money, people,
and technology are needed for Masco to build a company-wide e-business platform (Harvard
Business School Press, 2005). Finally, partners, people, and technology are required in order for
Masco to negotiate with buyers concerning its plans to deliver directly to consumers (Harvard Business
School Press, 2005).
Interlocks must also occur to accomplish their goals (Harvard Business School Press, 2005). The
formulation of an online selling platform will primarily involve a collaborative effort between
information technology, marketing, and sales units; the acquisition of suppliers will involve exchanges
between finance, human resource, and production departments; and the negotiations to attain greater
control over distributors – as well as their effects – will involve communications between external
partners and distribution units (Harvard Business School Press, 2005).
To initiate these interlocks, strategic communication must take place from the corporate-level and
cascade down to mid-level managers in each subsidiary (Harvard Business School Press, 2005).
Afterward, cross-functional teams incorporating departmental collaborations will be assembled within
and by each subsidiary to implement the necessary changes as well as to ensure the success of said
changes (Harvard Business School Press, 2005).

Strategy Review, Evaluation, and Control

The key to reviewing the progress made against the strategic implementation plan lies in the ability of
low- and mid-level employees, subsidiary managers, and parent company executives to communicate
openly and honestly on a regular basis (Harvard Business School Press, 2005).
More specifically, low- to mid-level employees in each subsidiary who are primarily involved in
operations and the daily implementation of strategy must together conduct clear and concise reviews
on a weekly basis to formally inform managers of progress as well as to quickly deflect and eliminate
possible unforeseen issues (Harvard Business School Press, 2005). Managers must also work on the
front lines and contribute as much as they can, assisting their employees to prevent or quickly address
any misunderstandings concerning the formulated strategy (Harvard Business School Press, 2005).
Because Masco’s top executives have 18 subsidiaries to maintain communications with and cannot be
everywhere at once, formal progress reports must be compiled and sent upward by subsidiary
managers on a monthly basis (taking into consideration weekly reports created by their employees) as
well as on a quarterly basis (Masco Corporation, 2017k). With that said, it is imperative that
executives also make an earnest effort to – as often as possible – schedule teleconferences with
managers, create targeted messages to every one of its subsidiaries, and fly out to meet with workers
in order to not only sustain a culture characterized by continuous strategic communication, but to share
their own perspectives regarding how to approach problems and facilitate the implementation
process as well (Harvard Business School Press, 2005).
Conducting such a review process – to find and fix strategy implementation problems – allows Masco
to participate fully in both the acquire, interpret, apply and the plan, do, study, act processes and, in
turn, maintain and improve its capabilities of achieving success as a sustainable learning organization
(Garvin, 2000).
Concerning the PDSA process’s relationship with strategic management, formulating strategies
comprises the planning stage; implementing each strategy via executing the action plan comprises the
doing stage; compiling progress reports, managing by walking around to sense deviations from action
plans, and analyzing performance metrics to determine necessary adjustments comprise the study
stage; and refining the execution process by acting in accordance with said adjustments comprises the
act stage (Scholtes, 1997). The cycle begins again whenever a plan is created to elicit any change
regarding a strategy/the strategies and/or the actions taken to implement it/them (Scholtes, 1997).
To evaluate the implementation of its strategy so that the root causes of any gaps between the plan,
actions, and results are identified and addressed, Masco’s executives and unit managers will track the
aforementioned performance metrics for each strategic company-wide goal as well as each unit goal
(Harvard Business School Press, 2005). If implementation is occurring too slowly, then adjustments must
be made by the collaborating units and/or the executives to course-correct either by simply
communicating to discover a workable solution that improves employees’ ability to execute or by
attempting other, more serious solutions involving the use of coercive power (Harvard Business School
Press, 2005). If performance metrics show that functional teams are on track and yet are somehow
failing to accomplish the objectives laid out by the parent-company executives, then the strategy itself
may need adjusting (Harvard Business School Press, 2005).
Common and foreseeable issues that Masco can adequately prepared for include a failure of parent
company and/or subsidiary unit managers to interlock, plan expansion or trimming due to budgetary
constraints or changes in the strategic landscape that necessitate quicker or enhanced implementation,
inadequate human and/or financial capital that causes the organization to become less effective in
pursuing its other strategies, and a resistance to change that may occur by those impacted by the
changes (especially major customers, purchasers, distributors, and production teams) (Harvard Business
School Press, 2005).
To solve interlock problems, one executive in each product division will be assigned to initiate
empathic communication, discover the root cause of the collaboration issues, and attempt to find and
implement win-win solutions (Covey, 2004). Because they have the authority to modify every strategy
across Masco, financial and human resource units of the parent company will set aside additional
funds and assign mid-level subsidiary managers who are not currently involved in the interlocks to
serve as a reserve in the event that plans are expanded or trimmed (Harvard Business School Press,
2005).
Subsidiary executives will be assigned to identify potential resisters and communicate why the change
is needed because they possess control over each division and can ensure that every one of them is
accounted for (Harvard Business School Press, 2005). If implementing the strategy still results in them
resisting change, then the executives will be in charge of attempting once again to emphasize why the
change is needed, relaying the benefits to them, helping them find new roles, empowering them,
and/or relocating them to another unit (Harvard Business School Press, 2005).
As Masco implements its strategies, it will exercise appropriate management controls so that
adjustments are made and its actions and results realign with said strategies by first utilizing Revised
IFE and EFE Matrices to review the foundation for each of its strategies, or its internal strengths and
weaknesses as well as its external opportunities and threats (David, 2010). Masco will then answer
three primary questions concerning whether or not major changes have occurred internally and
externally and whether or not it has progressed satisfactorily toward its objectives and goals (David,
2010).
Next, Masco will measure organizational performance by comparing its expected results to its actual
results (David, 2010). Unit goals will be assessed on a monthly, quarterly, and annual basis because
action plans have a greater short-term impact on their performance metrics while company-wide
strategic goals will be assessed quarterly and annually to ensure the company’s progressing over the
long term (David, 2010).
Depending on how wide the rift is between expected and actual results, interlocking teams and the
individual managers who “own” tasks in an action plan will communicate to determine the ramifications
of the performance. Because backward and forward integration involve acquiring and/or gaining
control over firms and/or processes, possible corrective actions can span from allocating resources
differently to completely altering Masco’s structure. At any rate, while swift course correction is key,
Masco must also carefully consider every possible course of action prior to implementation because
any significant shift can possibly complicate where it has strived to simplify and, in turn, destroy the
cultural and structural alignment that it has only recently achieved (David, 2010).
Risks are involved in implementing backward integration, forward integration, and low-cost
leadership strategies; in short, executing these strategies will potentially engender several problems
(David, 2010). A shifting business environment that renders any one of the given strategies
inadequate and an ingrained culture gap between Masco and its acquisitions may exist and
significantly hamper the organization’s progress toward its goals (Harvard Business Press, 2005).
To account for those potential problems, contingency plans must be formulated and unit managers
must each be assigned a risk associated with the strategy they are implementing to spread out and
clarify who is responsible and accountable (Harvard Business Press, 2005).
Revised IFE and EFE matrix analyses will be conducted monthly by subsidiary managers in tandem
with their progress reports to monitor the ever-changing strategic landscape and inform parent-level
executives if the strategy needs to be revised in any way or scrapped immediately in order to
combat risks to their respective companies (David, 2010). For instance, if Sherwin-Williams implements
a low-cost leadership strategy that Behr cannot compete with, then it would be up to the Behr
manager to explain in full detail the conditions necessitating the postponement of the strategy’s
implementation (David, 2010).
Additionally, parent-level executives will be in charge of ensuring that acquisitions’ cultures and
structures can merge successfully with the culture and structure of Masco because they are largely
responsible for deciding which companies to acquire. If a conflict exists, then empathic communication
must also exist between companies at all levels to synergistically solve it (Covey, 2004). Both Masco
and its acquisitions must be willing to learn from and incorporate each other’s superior aspects
(Harvard Business School Press, 2005). Therefore, if any acquisition underperforms over a three-year
period and still cannot integrate culturally, then a contingency plan that includes options such as
divestiture, retrenchment, and restructuring will be consulted and implemented (Harvard Business
School Press, 2005).
To adequately engage everyone at Masco and help them to commit to successfully implementing the
new strategies, company-wide strategic communication is of paramount importance (Harvard Business
School Press, 2005). Changes are frightening, and everyone – especially those who feel they have
something to lose – must fully understand the who, what, why, when, and how involved in such changes
(Harvard Business School Press, 2005).
First, Masco must create teams of people who are in relevant positions of power, put Masco’s interests
before their own, and possess the relevant expertise and sufficient credibility to consistently and
articulately communicate and set an example for the rest of the company with respect to the new
strategies about to be implemented (Harvard Business School Press, 2005).
Next, enabling structures must be rolled out for each brand to test out implementation; for instance,
significant brands such as Delta and Behr will go live and begin selling directly to consumers prior to
the rest of the subsidiaries in order to set an example for lesser-known brands to emulate (Masco
Corporation, 2017k). Furthermore, brands in each product segment will lower prices for a three-month
period to test the market’s and competitors’ reactions over a period that is universally utilized as a
checkpoint (a quarter) and can therefore be easily compared externally and internally (Masco
Corporation, 2016a). Reward systems aligned with adequate progress toward unit goals must be
constructed in order to incentivize workers to accept and be motivated to implement changes; thus,
adequate yearly progress for each unit involved in a strategy will involve a 5% end-of-year bonus
for every individual involved on top of their existing compensation packages that rewards success
while still retaining a better portion of the profits to sustain its lean methodology (Harvard Business
School Press, 2005).
Finally, there must be relentless strategic communication spanning every level of Masco Corporation in
the forms of teleconferences, targeted, previously prepared messages, and in-person meetings that
provide evidence of the strategy’s success (Harvard Business Press, 2005). An influential leader (CEO
Keith J. Allman, Chairman Emeritus Richard Manoogian, and/or subsidiary executives) will inform and
congratulate employees whenever milestones are reached to let them know that their efforts are
appreciated at all levels of the organization (Masco Corporation, 2017j).
Executives and members of companies within the same product segments, individual brands, or all
subsidiaries together must communicate to share best practices and ascertain the continued alignment
of the corporation’s guiding stars; thus, in addition to the parent company executives’ messages and
presentations, Masco will incorporate this type of communication by having subsidiary executives
involved in and/or impacted by the same strategy (backward and forward integration, to be specific)
discuss their progress on a monthly basis and, in turn, share the insights gained with their employees
(Harvard Business Press, 2005).

Synthesize, Integrate, Summarize: Conclusion

From its humble beginning as Masco Screw Products Company in 1929 and all the way up to the
present, Masco Corporation has built upon founder Alexander Manoogian’s vision “…to be
recognized as the global leader in the innovation and marketing of quality building products and
services” (Masco Corporation, 2016b).

As a self-professed world leader in designing, manufacturing, and distributing branded home

improvement and building products and a strong advocate for corporate social responsibility and
ethics, Masco’s mission can be summed up in this statement: With a strong commitment to excellence
and a desire to help our own people, the world community, and the planet, we at Masco Corporation
strive to provide unique value and growth opportunities to our shareholders by serving a global
market, assisting our customers in constructing their homes and workplaces through our offerings of
high quality and state-of-the-art plumbing, cabinet, decorative architectural, window, and other
specialty products (Masco Corporation, 2016b).

To continuously narrow the gap between its mission and vision, Masco strives to adhere to its
commitment to excellence in utilizing its core competency – its superior ability to maintain strong
brands while consistently introducing innovative, state of the art products – to formulate and pursue its
strategies: “Driven by a focus on excellence in people, products, service, and partnering relationships,
Masco remains committed to being a premier growth company. The Masco quest for quality and its
standard of excellence remain as strong today as yesterday” (Griffin Windows, 2017).

Masco has experienced a multitude of successes and failures over the years; however, with the hiring
of President and CEO Keith J. Allman in 2014, Masco has enjoyed an era of continued expansion and
financial success (Masco Corporation, 2017m). The fundamental shift he implemented to a center-led
model that aligns Masco’s corporate structure with a three-pillar strategy focused on driving the full
potential of core businesses, leveraging the collective strength of the firm, and actively managing its
portfolio has incorporated knowledge gained from the recent housing crash, reducing corporate waste
via a lean operating system methodology, instilling flexibility via the delegation of decision-making
authority to brands, and diversifying assets and markets to reduce dependence on cyclical sector that
is residential home construction (Masco Corporation, 2016a).

In spite of his wide-ranging changes and their subsequent successes, weaknesses and threats that can
be minimized via the pursuance of certain strategies still exist. Internally, long-term debt remains
substantial, strategic communication does not travel to lower-level employees and said employees are
not engaged due to a lack of incentives, technology is not leveraged in the selling process, and its
supply chain is hopelessly complex (Masco Corporation, 2016a). Externally, in addition to ever-
present geopolitical risks, competition is fiercer than ever before and knowledge management tools
and asymmetrical relationships with customers and suppliers grant them greater bargaining power
than ever before (Masco Corporation, 2016a).

To eliminate these weaknesses and threats, built upon the capabilities revealed by matching up
Masco’s current strategies, low-cost leadership, backward integration, and forward integration
strategies have also been formulated and are ready to be implemented that synergize not only with
each other, but with said existing strategies (David, 2010). Backward integration and forward
integration will impart greater control over the supply chain to Masco that reduces costs and, in turn,
allows it to relay those reduced costs to its customers in the form of reduced prices (David, 2010).

Assuming control of suppliers will effect an alignment of practices and cultures that reduces supplier
bargaining power and, in turn, simplifies logistics and reduces costs (David, 2010). Assuming control of
distribution channels via leveraging e-business technology and existing retailer relationships will target
customers directly in a fashion that does not cannibalize sales or engender redundancies; selling
directly also involves reduced costs (David, 2010). By minimizing the transaction costs of time and
money with an e-business strategy, savings will be passed down to customers via the implementation
of a low-cost leadership strategy, which will in turn differentiate Masco’s brands from those of
competitors, bolster Masco’s efforts to increase market share, and facilitate its journey in achieving its
overarching vision (Masco Corporation, 2016b).

Combined with a specified plan of action, several specific, measurable, attainable, realistic, and time-
bound unit and strategic goals that align with Masco’s core competency, commitment to excellence,
mission, and vision have been created with the purpose of providing a sufficient means through which
to stay on course (Harvard Business Press, 2005). Moreover, controls and contingency plans have also
been incorporated at all levels of the organization to evaluate progress and swiftly address any
problems (Harvard Business Press, 2005).

All in all, Masco Corporation now possesses a detailed, yet clear solution to its problems that not only
maintains total organizational alignment, but transforms it into a sustainable learning organization that
perpetually progresses it toward the vision it desires to achieve (Masco Corporation, 2016b).
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STUDY AUTHOR
JEREMY HERRICK