Schools don't make these decisions lightly and would always do what they believe is in the best interest of the student (in the sense of maximising their grades) - afterall students getting higher grades is better for the school so no school in their right mind would cap a student's grade at a C (Foundation) if they had a realistic chance of getting higher.
Arguments such as "he needs an A* to be a XXXX" are rarely helpful though - entries are not about what a student "needs" but rather what they are capable of at this time.
Having said that schools do sometimes get it wrong and, if you feel this is the case, then I'd suggest approaching the school and asking to discuss it.
The final decisions about tiers of entry can actually be made on the day (although there is a steep financial penalty for such late changes) and obviously if a student had been revising for Foundation a switch to Higher at such a late stage would be very dangerous.
I always took the line that the decision about tier of entry was the schools (using professional judgement) but that the entry belonged to the student so, if the parent/student really disagreed then I'd let them make the final decision but ensure that I, as Head of Department, was covered with a letter stating that the entry was against my professional judgement.
In 8 years (so over 2000 students, sitting over 4000 exams) it happened twice that I relented to a parental desire despite providing evidence for my initial decision.
Once the student moved from Foundation to Higher and ended up scraping a C - which they would also have achieved I believe at Foundation.
On the other occasion the student also moved from Foundation to Higher and ended up with a U grade (they'd have been D/E borderline at Foundation). The parent complained to the school but I had the situation fully documented and was in the clear. Didn't help the student though.
The key is communication - why do the school think this is the correct tier of entry. Don't go in all guns blazing but ask how the decision was reached etc. - if they know their stuff they should be able to convince you.