Strategic Tactical Operations

2.
There are three basic decisions that a corporate manager ought to be aware and understand the
relationship of each decision. These decisions are important as it dictates firm long-term
profitability and survival. Therefore, it is crucial that these fundamental decision be carefully
charted by the finance manager. Elaborate on these decision and give examples of each that
managers took in order to implement financial strategies efficiently. (20 marks)
Answer 1
Decision making is part and parcel of implementing organization’s day-to-day operations. It allows the
direction of the organization based on the decision of the management. Decision making can be
classified into three categories based on the level at which they occur namely strategic, tactical and
operation.
Strategic decisions set the course of organization. Strategic level decision usually is the decision made by
top management. It is mean for a long-term strategic decision. For example strategic decision on how to
becoming market leader in the industry.
Tactical level decision usually the decision made by middle managers that formulate a short to medium
term tactical decision. In simplicity, tactical decisions are decisions about how things will get done. For
example, launching a new products variation in the market to secure more sales.
Finally, operational decisions are decisions that employees make each day to run the organization.
Operational level decision usually decided at Junior Manager or at supervisors’ level which decide the
needs for day-to-day operations and production decision. For example, procurement of raw material
from suppliers.
In another part of making strategic for the business orientation especially involving financial
management decision, the Financial Manager of a company must have the proper ability and training to
address key financial management decisions. The main aspects of the financial decision-making process
relate to investments, financing dividends and asset management.
As financial management refers to the acquisition, financing and management of assets. This decision-
making process is very sensitive and must be under the control of a Financial Manager to analyze
external and internal variables that can affect the normal development of company activities.
According to the Inter-American Investment Corporation (IIC), the role of the Financial Managers in the
decision-making process can be divided into four main areas:
 Investments: The Financial Manager is responsible for defining the optimal size of the company.
In this regard, it is important to have a market study in place and be clear on the objectives that
the company needs to meet. It is important to have properly studied the demand, technology
and equipment, financing methods and human resources available. In second place, the director
must analyze whether the resources adapt to the optimal size desired for the company. If they
don’t, it is necessary to define the types of assets that the company must acquire, or otherwise
sell or get rid of, in order to achieve efficient management.
 Financing: Defining a financing strategy is essential to the continuity of the business over the
long term. Access to financing is closely related with maintaining a constant inflow of capital
since the savings margin will not allow operations to continue for much longer without the
support of additional liquidity. The Financial Manager must define several aspects of the
financing strategy. For example, study the sources willing to offer credit to the organization, and
define the best financing options for operations. The Financial Manager can also design a mixed
financing strategy for efficient financial management: this is called the company’s “financing
mix”. Sometimes the company can benefit from a combination of short and long term financing
to meet investment and financial strategy objectives.
 Asset management: asset management is one of the main aspects for a company to adequately
meet its obligations and in turn to position itself to meet the objectives or growth targets that
have been laid out. In other words, the Financial Manager must stipulate and assure that the
existing assets are managed to the fullest utilization and most efficient way possible. Generally,
this manager must prioritize current asset management before fixed asset management.
Current assets are those that will become effective in the near future, such as accounts
receivable or inventories. By contrast, fixed assets lack liquidity since they are needed for
permanent operations and needs time to be liquidated.
 Dividend Policy: For private limited and holding companies, one of the most important financial
decisions that is related to the company’s dividend policy. It concerns how much of the
company’s earnings will be paid out to shareholders. Specifically, it is necessary to determine if
generated earnings will be reinvested in the company to improve operations or if they will be
distributed among shareholders. It is also possible to choose a mixed policy in this regard,
distributing a part among shareholders and investing the rest in the company. It is important to
consider that in order to have growth perspectives over the short, medium and long term,
reinvestments are necessary.
The three level of decision making namely strategic and operational are applied across the decision
making of financial managers in order to derive at sound and appropriate financial strategies that
suitable for the sustainability of business operations

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