strategic and tactical decisions are very important to business firms, but it will be differ in every firms. One issue in strategic management surrounds the distinction between strategic decisions and tactical decisions. A problem in making this distinction is that what is "strategic" in one company or context can be "tactical" in another company or context. It is important, nevertheless, to distinguish between strategic and tactical decisions and also the inter- relationships between these two levels of planning. Unless we understand what is strategic as opposed to tactical, our planning processes are likely to be ineffective and ambiguous.
Notwithstanding the difficulties in separating strategic from tactical, it is now generally accepted that there are a number of characteristics of strategic decisions which mark them out from their more tactical counterparts. These key characteristics are as follows.
Scope
- Strategic decisions are inevitably less concerned with the details of activities in the organisation. Rather.
- strategic decisions are broad in scope and will therefore contain little real detail. For example, one of the most important strategic decisions in a company is what business the company is to be in the future.
- In turn, this decision encompasses the selection of the product markets which the organisation will compete in, in the future. So, for example, it might involve decisions regarding the market segments that a company will operate in, but not detailed decisions regarding the choice of specific customers or how to compete for these customers.
Reflect Environmental and Competitive Factors
Strategic decisions, unlike many tactical ones, need to be based on, and reflect, broader environmental and competitive factors. So, for example, a strategic decision will involve the assessment of major opportunities and threats based on an environmental and competitive analysis. Normally, the major opportunities and threats which confront an organisation derive from trends and changes in an environment. Because of this, strategic decisions must be proactive and outward looking, as compared to tactical decisions.
Implication for Resource Allocations
Strategic decisions normally affect major resource allocations in an organisation. For example, strategic decisions may involve decisions about investing in say, new plant and/or new products. Certainly, some tactical decisions can involve large outlays, but it is strategic decisions which essentially determine an organisation's overall resource allocation.
Planning Horizons
Related to the issue of resource allocations is the fact that strategic decisions are normally characterised by longer planning horizons or timescales than tactical decisions. The resources committed by strategic decisions often extend some years into the future. Normally, tactical decisions will encompass planning horizons of no longer than one year, whereas strategic plans may encompass planning horizons of up to ten years and more ahead.
Complexity/Uncertainty
The large numbers of factors which must be assessed in strategic planning, coupled with the long-term planning horizons already mentioned, mean that strategic decisions are characterised by their complexity compared to tactical ones. Not only must a wide range of factors be taken into account in strategic decisions, but often these factors are complexly interrelated. In addition, strategic decisions often involve more uncertainty as to their potential outcomes.
Need for Integration
Strategic decisions will tend to involve and therefore cut across several functional areas in the organisation: for example, a strategic decision may have implications for production, marketing, finance, and personnel. Tactical decisions, on the other hand, can often be taken in the context of a particular functional area, although of course some degree of co-ordination may still be required. Strategic decisions therefore need to integrate across functional areas and will often require inputs and expertise from a wide range of managers from different functional areas of the business.
To summarise, although it is sometimes difficult to distinguish between strategic and other more tactical decisions in an organisation, in fact strategic decisions do tend to have a number of characteristics which set them aside from tactical decisions. By understanding these distinguishing characteristics, the manager is better placed to understand and implement strategic decisions
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