Essay Sample on Masco's Product Lines

Introduction

Masco deals with three major product lines; Plumbing, decorative architectural and cabinetry products. The plumbing products include faucet, sink and bathing products sold under the brand names like DELTA and BRIZO. The decorative architectural product line includes products like paints and primers. Cabinetry products line includes brand like KRAFTMAID. Finally, the windows and other specialty products include Vinyl and aluminum. For the year ended December 2017, the product line with the highest sales and profit was the plumbing product line with a net sale of $3.74 billion and operating profit of $698 million.

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Cabinet Segment

The cabinet segment relies heavily on a small number of large customers. These large customers for Masco products are mainly the home center retailers. To investors and shareholders, this means that the performance of Masco will depend primarily on its ability to secure the loyalty of the few large customers. The main warranty issues are ensuring that the products returned are well recognized by retailers. In this case, some of the retail outlets are not distinguishing between warranty and other types of returns, especially when such retailers are making claims for return deductions from the Masco Corp. The segment has a high market performance both at home and internationally, with high sales revenue collected from the international market. There are no significant concerns concerning the receivables and bad debts especially in the international market since the company sells its products on a cash basis. However, domestically, the concern is in the probability of the home center retailers failing to pay the company since they are allowed to purchase on credits.

Cabinet Market

The cabinet manufacturing industry in the domestic market has a high competition level, with numerous large companies as well as local and regional businesses both competing for the same number of consumers. However, the consumers in the market mainly choose products based on their features and selection, product quality, and price. In this case, competition is fair and each player, large or small, has the opportunity of succeeding. For the financial year 2017, the cabinet segment experienced a decline in the sales volume, as well as low financial power to support the high cost of launching new products in the international market, especially the North America region. Together with the anti-dumping and countervailing duties, the segment resulted in an antagonistic relationship between net selling prices and commodity costs. However, the company is planning to position itself in the future through cost-saving initiatives as well as using favorable sales mix. These will help in ensuring that the company becomes a better competitor and increases its sales volume in the future.

As an investor, it is important to note the resulting trend in the decline of the sales volume of the cabinet. However, an investor should consider the entire product portfolio, in which the positive sales volume in the other three product lines gives more than offset to the decrease in the cabinet sales volume. Besides, the company's positive initiatives are likely to turn this around and begin witnessing increases in sales volumes in the future.

Recommendations

Fancy Millwork should learn from the performance of Masco's performance in the industry. Generally, Masco has managed to remain profitable in an industry that is faced with stiff competition from both large companies and small-scale players. The company has diversified its product into four main segments. This is a better recommendation for Fancy millwork to engage in both product and geographic diversification. Secondly, Masco has been involved in a timely response to the negative performance of any of its segments as seen in the cost-reduction and marketing mix to respond to the cabinet segment's poor performance. In the same way, Fancy Millwork should also timely respond to any unfavorable market performance from any of its segments, which will lead to the overall positive performance in the market.