ORIGINAL: brian brian
As long as the top level bits of this are ruthless in allocating resources a geographic system would be fine, in that many areas get no units at all. Giving each area some resources might work out OK in some bloated corporate business structure. But in war you can't just share things out just so Colonel Klink gets to command something too.
So I guess what I am curious about is how the AI picks tasks to accomplish, and what resources it allocates to a task....this seems more important than parceling out slices of land and sea. In the Pacific for example, before the USN has numerical superiority over the IJN, it might shift from base to base to contain any further advances/raids by the Combined Fleet. This is a task performed independently of a given base. If Pearl has this many units and Samoa has this many and Brisbane has this many, the IJN might be able to exploit that quite nimbly if an USN AI can't keep an eye on the big picture.
The navy will be similar to the army. Since I have thought about the latter in more detail, I'll describe that.
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A Commanding General in a Land Region may have one of several stati:
1 - inactive: no troops from either side present (e.g., Canada).
2 - staging: friendly units present but expected to move to another friendly LR (e.g., the US).
3 - defensive: there are no enemy troops present in the LR, but there are threats (USSR before Barbarossa).
4 - defending: enemy units in the area and/or attacks being made from outside the LR (Poland after 1st impulse - from the Commonwealth persepctive).
5 - attacking: enemy holds the LR and we want to take it (Poland before the 1st impulse - from the German persepctive).
6 - consolidating: possibility of enemy partisans appearing (e.g., occupied France).
In the process of controlling his LR a Commanding General may have troops in an adjacent LR. For example, the German CG responsible for Poland starts with all his units outside of Poland; and some of them may remain outside for some time. Another case concerns Gibraltar, where the CG responsible for eastern Spain needs to move into western Spain to attack Gibraltar.
Staging may occur within an AO, where troops are transferred from one LR to another. This also can happen within a TO. Lastly, troops may be transferred from one TO to another. There are different Decision Makers responsible for each of these decisions. Every DM is going want more units and one of the keys to playing well will be deciding who gets what when.
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To address your concern, if the LR/AO/Sea Area/SAG/TO is inactive, then there is no need for units whatsoever, and any therein should be reassigned by a superior Decision Maker.