The most important determiner of your squads' strength is their level, not their equipment. Early battles are a significant challenge on normal difficulty, and you may need to grind several battles until your squads are all defeated just for the experience points (this is what I did) or use the arena (probably the smarter option, since the arena also awards the items you need to unlock their skills).
I was more speaking about "endgame" where ur squads are around level 11 so the only way of getting experience is to kill the "boss" in the last story battle. When ur at that point the only real way to improve and max out ur squads is by going for the higher tier equipment rather then farming that last battle for ages. Also the easiest way to level up ur squads (in my opinion) is by using the academy untill they are level 7 and then just farm the mid/low tier arena battles and then ur squads are level 10 within minutes.