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Organizational Decision Levels

Generally there are two levels of decisions in an organization. The first are strategic decisions. These decisions are broad in scope and long-term in nature. As a result they set the direction for the entire company. The second are tactical decisions, which are narrow in scope and short-term in nature. These two sets of decisions are intertwined with strategic decisions being made first and determining the direction of tactical decisions, which are made more frequently and routinely. Therefore, we have to start with strategic decisions and then move on to tactical decisions. This relationship is shown in Figure 1-3.

Figure 1-3

Figure 1-3 Levels of operations decisions

Strategic decisions set the tone for the other more specific decisions. They ask questions such as: What market are we in (and not in)? What are our unique strengths? How do we compete (and not compete)? These decisions are important as they define exactly how a company competes in the marketplace and exactly in what markets using specific strengths.

Tactical decisions focus on more specific day-to-day issues, such as the quantities and timing of specific resources, and how specific resources are used. They are bound by strategic decisions. Tactical decisions must be aligned with strategic decisions because they are the key to the company’s effectiveness in the long run. Tactical decisions provide feedback to strategic decisions, which can be modified accordingly. Without the direction provided by strategic decisions, companies may pursue competition in areas that do not directly contribute to the business plan and waste resources. Consider for example a company such as Southwest Airlines, which has always had a clear strategic direction to compete on cost. This has directly impacted tactical decisions, such as pursuing cost cutting efforts in operations in the form of no frills and one aircraft to minimize scheduling costs.

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