- Level of Conduct: As discussed earlier, strategy is developed at the highest level of management either at the headquarter or at major divisional offices and related exclusively to decisions in the province of these levels. Tactics is employed at and relates to lower levels of management.
- Periodicity: The formulation of strategy is both continuous and irregular. The process is continuous but the timing of decision is irregular as it depends on the appearance of opportunities, new ideas, crisis, management initiative, and other non-routine stimuli. Tactics is determined on a periodic basis by various or-generations. A fixed timetable may be followed for this purpose, for example, preparation of budgets at regular intervals.
- Time Horizon: Strategy has a long-term perspective; especially the successful strategies are followed for quite long periods. In occasional cases, it may have short-term duration. Thus, depending on the nature and requirement, its time horizon is flexible; however, emphasis is put on long-term. On the other hand, time horizon of tactics is short-run and definite. The duration is uniform, for example budget preparation.
- Uncertainty: Element of uncertainty is higher in the case of strategy formulation and its implementation. In fact, strategic decisions are taken under the conditions of partial ignorance. Tactical decisions are more certain as these are taken within the framework set by the strategy. Thus, evaluation of tactics is easier as compared to evaluation of a strategy.
- Information Needs: The total possible range of alternatives from which a man-ager can choose his strategic action is greater than tactics. A manager requires more information for arriving at strategic decision. Since an attempt is made to relate the organization to its environment, this requires information about the various aspects of environment. Naturally the collection of such information will be different. Tactical information is generated within the organization particularly from accounting procedures and statistical sources.
- Subjective Values: The formulation of strategy is affected considerably by the personal values of the person involved in the process. For example, what should be the goals of an organization is affected considerably by the personal values of the persons concerned. This aspect will be taken for further discussion m this text later. On the other hand, tactics is normally free from such values because this is to .be taken within the context of strategic decisions.
- Importance: Strategies are most important factors of organization because they decide the future course of action for the organization as a whole. On the other hand, tactics are of less importance because they are concerned with specific part of the organization. This difference, though seems to be simple, becomes important from managerial action point of view.
- Type of Personnel Involved in Formulation: Generally separate group of managerial personnel are involved m strategy and tactics formulation and their implementation. As discussed earlier, strategic decisions are never delegated below a certain level m the managerial hierarchy. The basic principle m this context is not to delegate below the levels than those possess the perspective required for most effective strategic decisions. Tactical decisions can be taken by personnel at lower levels because these involve minute implementation of strategic decisions.
Though these differences between strategy and tactics are there, often the lines of demarcation between these two are blurred both conceptually and operationally. At the one extreme end, the differences are crystal clear, as discussed above. But these differences may not always hold true because tactics is generated by strategy and may rightly be called sub-strategy. What is one manager’s strategy is another manager’s tactics and vice-versa. For example, strategies are developed at the head-quarters m the strategic planning process. Sub strategies within this strategic planning may then be pursued by various divisions of the company. Thus, what might be considered tactical plans at the headquarters may be termed as strategy at the divisional levels? Thus, depending on the level of the organization, an action may be strategic or tactical. Levels of Strategy may operate at different levels of an organization- corporate level, business level, and functional level.
Corporate Level Strategy Corporate level strategy occupies the highest level of strategic decision-making and covers actions dealing with the objective of the firm, acquisition and allocation of resources and coordination of strategies of various SBUs for optimal performance. Such decisions are made by top management of the organization. The nature of strategic decisions tends to be value-oriented, conceptual and less concrete than decisions at the business or functional level.
Business-level Strategy: Business-level strategy is applicable in those organizations which have different businesses-and each business is treated as strategic business unit (SBU). The fundamental concept in SBU is to identify the discrete independent product/market segments served by an organization. Since each product/market segment has a distinct environment, a SBU is created for each such segment. For example, Reliance Industries Limited operates in textile fabrics, yarns, fibres, and a variety of petro- chemical products. For each product group, the nature of market in terms of customers, competition, and marketing channel differs. There-fore, it requires different strategies for its different product groups. Thus, where SBU concept is applied, each SBU sets its own strategies to make the best use of its resources (its strategic advantages) given the environment it faces. At such a level, strategy is a comprehensive plan providing objectives for SBUs, allocation of re-sources among functional areas and coordination between them for making optimal contribution to the achievement of corporate-level objectives. Such strategies operate within the overall strategies of the organization. The corporate strategy sets the long-term objectives of the firm and the broad constraints and policies within which a SBU operates. The corporate level will help the SBU define its scope of operations and also limit or enhance the SBU’s operations by the resources the corporate level assigns to it. There is a difference between corporate-level and business- level strategies.
For example, Andrews says that in an organization of any size or diversity, corporate strategy usually applies to the whole enterprise, while business strategy, less comprehensive, defines the choice of product or service and market of individual business within the firm. In other words, business strategy relates to the ‘how’ and corporate strategy to the ‘what’. Corporate strategy defines the business in which a company will compete preferably in a way that focuses resources to convert distinctive competence into competitive advantage. Corporate strategy is not the subtotal of business strategies of the corporation but it deals with different subject-matter. While the corporation is concerned with and has impact on business strategy, the former is concerned with the shape and balancing of growth and renewal rather than in market execution.
Functional-level Strategy: Functional strategy, as is suggested by the title, relates to a single functional operation and the activities involved therein. Decisions at this level within the organization are often described as tactical. Such decisions are guided and constrained by some overall strategic considerations. Functional strategy deals with relatively restricted plan providing objectives for specific function allocation of resources among different operations within that functional area and coordination between them for optimal contribution to the achievement of the SBU and corporate-level objectives. Below the functional- level strategy, there may be operations-level strategies as each function may be divided into several sub functions. For example, marketing strategy, a functional strategy, can be subdivided into promotion, sales, distribution, pricing strategies with each sub function strategy contributing to functional strategy.
Strategies at all the three levels are interlinked in which a higher- level strategy generates a lower-level strategy and a lower-level strategy contributes to the achievement of the objectives of higher-level strategy.
Formulation of Strategy: Formulation of strategies is a creative and analytical process. It is a process because particular functions are performed in a sequence over the period of time. The process involves a number of activities and their analysis to arrive at a decision. Though there may not be unanimity over these activities particularly in the context of organizational variability, a complete process of strategy formulation and implementation can be understood. The process set out above includes strategy formulation and its implementation, what has been referred to as strategic management process. The same process can be applied to both strategy and policy. The figure suggests the various elements of strategy formulation and process and the way they interact among themselves. Accordingly .the various elements are organizational mission and objectives, environmental analysis, corporate analysis, identification of alternatives, and choice of alternative. Up to this stage the formulation is complete. However, implementation is closely related with formulation because it will provide feedback for adjusting strategy. A brief discussion of each element will be helpful to understand the problems involved in each.
