You can select the strength of a unit when creating it, or when upgrading it at a base.
To upgrade, have the unit on your base, click the unit and select the modify button that looks like a percent symbol to increase the strength level. Prices are shown.
You can combine two units of a given type if their combined strength is 9 or less, they have to be close to each other. Select the unit you want to combine into the other, hit the merge button, the units you can merge with will be highlighted. Merge with the unit you intend to.