Michael_A._Hitt,_R._Duane_Ireland,_Robert_E._Hosk

356 Part 3: Strategic Actions: Strategy Implementation

a strong focus on marketing and product R&D rather than manufacturing and process

R&D (as with the cost leadership form of the functional structure) characterize the differ-

entiation form of the functional structure (see Figure 11.3). From this structure emerges a

development-oriented culture in which employees try to find ways to further differentiate

current products and to develop new, highly differentiated products.^66

Continuous product innovation demands that people throughout the firm interpret

and take action based on information that is often ambiguous, incomplete, and uncertain.

Following a strong focus on the external environment to identify new opportunities, employ-

ees often gather this information from people outside the firm (e.g., customers and suppli-

ers). Commonly, rapid responses to the possibilities indicated by the collected information

are necessary, suggesting the need for decentralized decision-making responsibility and

authority. The differentiation strategy also needs a structure through which a strong tech-

nological capability is developed and strategic flexibility characterizes how the firm operates

while competing against rivals. A strong technological capability and strategic flexibility

enhance the firm’s ability to take advantage of opportunities that changes in markets create.^67

To support the creativity needed and the continuous pursuit of new sources of dif-

ferentiation and new products, jobs in this structure are not highly specialized. This lack

of specialization means that workers have a relatively large number of tasks in their job

descriptions. Few formal rules and procedures also characterize this structure. Low for-

malization, decentralization of decision-making authority and responsibility, and low spe-

cialization of work tasks combine to create a structure in which people interact frequently

to exchange ideas about how to further differentiate current products while developing

ideas for new products that can be crisply differentiated at a point in the future.

Under Armour uses a differentiation strategy and matching structure to achieve suc-

cess in the sports apparel market. Under Armour’s objective is to create improved athletic

Figure 11.3 Functional Structure for Implementing a Differentiation Strategy

New Product

R&D

Human

Resources

Operations Marketing Finance

R&D Marketing

President and

Limited Staff

Notes:

• Marketing is the main function for keeping track of new product ideas.


• New product R&D is emphasized.


• Most functions are decentralized, but R&D and marketing may have centralized staffs that work closely with each other.


• Formalization is limited so that new product ideas can emerge easily and change is more readily accomplished.


• Overall structure is organic; job roles are less structured.