Lesson 2

Levels of Strategic Decisions

TOPICS:
Strategic level decisions
Tactical level decisions
Operational level decisions
LEARNING OUTCOMES
At the end of the lesson you should be able to discuss the different challenges in
the external environment.

TOPIC 1: Strategic Level Decisions

Different ‘levels’

It is useful at this stage to gain an understanding of what characterizes strategic

decisions. Management decisions in an organization can be classified in three broad
and sometimes overlapping categories: strategic, tactical and operational.
Str
ate
gic
Le
vel
Tactical
Level

Operational Level

Figure 1.1 Levels of strategic decision-making

Strategic, tactical and operational decisions within an organization differ from each other
in terms of their:
● focus;
● level in the organization at which they are made;
● scope;
● time horizon;
● degree of certainty or uncertainty;
● complexity.
The differences between the three levels of decision making are summarized in Table
1.1.
Strategic level decisions Strategic decisions (which are our primary focus) are
concerned with:
● the acquisition of sustainable competitive advantage (in a commercial organization);
● the setting of long-term objectives;
● the formulation, evaluation, selection and monitoring of strategies to achieve these
objectives.

Strategic decisions normally have a number of characteristic features in that they:

● are made by senior managers (usually directors);

● affect the whole organization (or a substantial discrete part of the whole organization);
● are medium to long-term in nature;
● are complex and often based upon uncertain or incomplete information. Managers at
the strategic level require multi-conceptual skills – the ability to consider the effects of
multiple internal and external influences on the business and the possible ways in which
strategy can be adjusted to account for such influences.

TOPIC 2: Tactical level decisions

Tactical level decisions

Tactical decisions are concerned with how strategic level objectives are to be
met and how strategies are implemented. They are dependent upon overall strategy
and involve fine tuning and adjustment. They are usually made at the head of business
unit, department or functional area level and they have an effect only in parts of the
organization. They are normally medium-term in timescale, semi-complex and usually
involve some uncertainty but not as much as at the strategic level.

TOPIC 3: Operational Level Decisions

Operational decisions are concerned with the shorter-term objectives of the

business and with its day to-day management. They are dependent upon strategy and
tactics. These decisions are made at junior managerial or supervisory level, are based
on a high degree of certainty, and are not complex.

Time and planning horizons One of the key differences between the levels of
decision making in organizations is the timescale with which they are concerned. It is
usually considered that the higher up the organization, the longer the timescale with
which management is concerned. Certainly, this is true in most manufacturing
companies. However, in service organizations, such as those we are concerned with
THE organizations, the situation is often somewhat different. Service delivery is of prime
importance to service-based companies, and consequently relatively senior staff can
often be involved to some degree in operational decision making. In the delivery of
services, it is vital that managers ensure that the service provided is:
● delivered to specified quality standards;
● capable of being replicated;
● resilient (i.e. service standards can resist unexpected changes). The differing
time horizons for decision making are illustrated below in the case of a group of hotels.
Strategic management involves taking account of a large number of environmental
variables. The longer ahead that a manager seeks to plan for, the more uncertainty is
introduced into the analysis.