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5 Types of Business Decisions You Should Understand

5 Types of Business Decisions


Good business decision making involves identifying and analyzing various options, comparing those options, and choosing the one that maximizes your company’s profitability. In other words, it’s about ensuring that your choice will benefit your business. It would help if you considered strategic, financial, hiring and staffing, operational, and tactical business decisions.

The Importance of Making Good Business Decisions

There are many things that can hinder good decision making. Lack of information, experience, and having a bias towards certain actions are just a few. A good business decision can turn an entire business around. Making consistently bad business decisions can doom a company. Good business decisions aren’t always obvious, however.  

In the early 2000s, Netflix was trying to make a name for itself by shipping DVDs to customers and, later, allowing customers to stream movies and television through the internet.  

In February 2007, the company delivered its billionth DVD, and began to move away from its original core business model of DVDs, by introducing video on demand. Netflix grew as DVD sales fell from 2006 to 2011. However, the company decided to move away from the DVD sales side of its business. Instead, Netflix decided to focus on streaming.

We all know what happened next. In 2013, Netflix reported that it had added two million United States customers during the fourth quarter of 2012, with a total of 27.1 million United States and 29.4 million total streaming customers worldwide. While its major competitor, Blockbuster Video, failed to make the good business decisions needed to keep up. It ultimately led to the failure of the entire business.

Netflix now has revenues around $29 billion annually. And even though there is more competition among streaming services with Amazon Plus, Disney+, Hulu and HBOMax, available  Netflix is still the most popular streaming service.

Netflix’s decision to focus on streaming is regarded as one of the best business decisions of all time

Now, let’s take a look at some of the different types of business decisions. These are the types of decisions all business owners will have to make at some point. Making the best decisions in this area can help propel your business to a smoother operation and increased growth.

5 Types of Business Decisions

1. Strategic

Strategic decisions are the decisions that affect an entire firm’s environment, resources, and employees. These include investments in facilities, personnel, or other resources. They also affect the direction of your company—such as whether to expand into new markets—and can be made by either you alone or an executive team (i.e., CEO and Board of Directors).

It would be best if you made strategic decisions based on what you believe will give your company its best chance at success in the long run. 

For example, if there are two similar products on the market today, only one has become popular with customers and continues gaining traction among them every year since its release. It would make sense for you to try selling this product instead of another one that hasn’t entirely caught on yet, even though both are equally priced.

2. Financial

Good financial decisions are sometimes the toughest decisions to make. Financial decisions are based on financial information about the business’s performance. It draws on several financial documents, including cash flow statements, balance sheets, and profit and loss statements. 

The types of financial decisions include:

  • Acquisition or divestiture of a company (buying or selling another company)
  • Investment in research and development (R&D) as well as new products or services
  • Pricing strategy for a product or service – How much to charge, whether to charge more than competitors and what discounting policies to use.


Financial decisions are important because they affect the company’s profitability and cash flow. They can also help management make strategic decisions about how to compete in the marketplace. 

For example, pricing strategy may influence a firm’s spending on R&D versus advertising.


3. Hiring and staffing

Hiring and staffing are recruiting and retaining people who can help the organization reach its goals. Some businesses ask agencies to find candidates for their vacant positions, but you can do it yourself. You can use job boards and social media to find qualified candidates. You can also hire temp workers to help you meet short-term staffing needs.

It’s important to ensure that hiring and staffing needs are addressed in all areas of your business. Managing people is a key component of running a business. It’s important to develop employee skills and productivity and ensure that your staff is happy and motivated. In addition to providing that you have the right people in the right jobs, you also need to train them on their tasks to perform well.

4. Operational

Operational decisions are about how you run the business. They’re not necessarily big or long-term, but they can be essential. 

Operational decisions include:


  • What hours of business will we operate? If you operate a retail store, you might decide that your hours are 8 am-5 pm Monday through Friday. If you run a restaurant, your hours are 11 am-10 pm seven days a week.
  • What business systems should we have? Business systems include accounting, inventory management, customer relationship management (CRM), email marketing automation, and more.
  • What is our daily routine? The daily routine of your business can be broad, but it’s important to outline what your daily routine will look like. This can include how you’ll handle customer service inquiries or manage the books at the end of each day.
  • How will we collect information? You can collect information using surveys, exit interviews, and customer feedback forms. You can also use data from your CRM or Google Analytics to gather information about what people are searching for when they come to your site.
  • How will we manage inventory? You can manage inventory with a tool like Sortly. This will allow you to track what products are selling well and which ones need to be reordered. Once you have a list of the items that need to be reordered, you can place an order with your supplier.

5. Tactical

Tactical decisions are directors implementing a company’s general strategy by making decisions and formulating plans that affect its operations.

They are more specific to the company and the situation, but they’re still not as broad as strategic decisions. Managers and supervisors often make tactical decisions and have more freedom to make changes than other company members.

Tactical decisions are made with a specific goal, like increasing sales by promoting a new product, launching a marketing campaign, decreasing costs by negotiating with vendors for better prices, or implementing a new production process.

Decisions also involve schedules which often include a timeline for completion and meetings or reorganization by improving sales or customer service.


In conclusion, many strategic, financial, hiring and staff, operational, and tactical decisions each have their purpose and are used for a different type of problem. Each decision is not more important than the other so pay attention to them all to avoid neglect. With practice, patience and some guidance, understanding these types of decisions is the first step toward you becoming a great decisions maker.

Jazmin Merriman
Team Writer: Jazmin Merriman is a writer, studying to become a Family and Marriage Therapist. She loves writing about minimalism, business, finances and lifestyle. She likes to inspire people to live a more intentional life by showing them what she does as an example.

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Team Writer: Jazmin Merriman is a writer, studying to become a Family and Marriage Therapist. She loves writing about minimalism, business, finances and lifestyle. She likes to inspire people to live a more intentional life by showing them what she does as an example.

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