Evaluating options against criteria

Q: What are the three criteria of the SAF framework used to evaluate strategic options?

The three criteria are Suitability , Acceptability , and Feasibility .

Q: Which tools can be used to objectively measure the Suitability of a strategy?

Common tools include Ranking against success factors, Decision Trees , and Scenario Analysis .

Q: How is Return typically measured when assessing the Acceptability of a strategy?

Return is measured using financial metrics such as ROCE , NPV , and the Payback Period .

Q: What tools are used to evaluate the Risk component of Acceptability?

Risk is evaluated using Sensitivity Analysis and Financial Ratio Analysis .

Q: What is the focus of the Feasibility criterion in strategic evaluation?

Feasibility assesses whether the organization has the Resources and Competences (such as money, people, and technology) to successfully implement the strategy.

Q: What framework can be used to comprehensively check the Feasibility of a strategy?

The 9Ms Framework can be used to audit resources like Money, Men (people), Machines, and Materials.

Q: What is a common mistake when distinguishing between Suitability and Feasibility?

Mixing them up; remember that Suitability is about the strategic fit with the environment, while Feasibility is about internal resource availability.

E3 – Strategic Management · CIMA (CGMA Professional Qualification) · 5 min read

Introduction: Picking the Winning Strategy

Welcome to one of the most practical parts of the E3 syllabus! Up until now, you’ve learned how to analyze a business and brainstorm different directions it could take. But how do you decide which idea is a "winner" and which one should be thrown in the bin?

In this chapter, we explore the Evaluating options against criteria phase. Think of this as the "filtering" process. We use a world-renowned framework called SAF (Suitability, Acceptability, and Feasibility) to put our strategic ideas to the test. By the end of these notes, you’ll be able to judge any business strategy like a pro!

The Framework: Suitability, Acceptability, and Feasibility (SAF)

Developed by Johnson, Scholes, and Whittington, the SAF Framework is the "gold standard" for evaluating strategic options. If you remember nothing else from this chapter, remember these three letters!

Memory Aid: Just think of a SAFe choice. To be "safe," a strategy must pass all three tests.

1. Suitability: Does it fit?

Suitability is all about the "logic" of the strategy. We ask: Does this strategy actually address the situation the company is in? Does it use our strengths and fix our weaknesses?

To assess suitability, we look back at our strategic analysis (like SWOT or PESTEL). A strategy is suitable if it:

Explores Opportunities in the environment.
Counteracts Threats.
Capitalizes on Strengths (core competences).
Overcomes Weaknesses.
Fits the organization’s Mission and Objectives.

Tools to measure Suitability:

1. Ranking: Comparing different options against key success factors and giving them a score.
2. Decision Trees: Mapping out choices and their logical outcomes.
3. Scenario Analysis: Testing if the strategy works in different "future worlds."

Analogy: Imagine you are a world-class marathon runner (Strength). A "suitable" strategy for your career is entering a long-distance race. Entering a heavy-weight boxing match is NOT suitable, even if the prize money is high, because it doesn't fit your strengths!

Key Takeaway:

Suitability is the "Strategic Fit." It's about whether the idea makes sense given the company's current position and the external environment.

2. Acceptability: Will the stakeholders be happy?

Even if a strategy is a great fit (Suitable), it might be rejected if the people in charge or the investors don't like it. Acceptability is about the expected performance outcomes.

We usually measure acceptability using three sub-criteria: Return, Risk, and Stakeholder Reactions.

A. Return (The Reward)

Financial returns are the most common measure. Common tools include:

ROCE (Return on Capital Employed): \( \frac{Profit}{Capital \space Employed} \times 100 \)
NPV (Net Present Value): Does the project add value in today's dollars?
Payback Period: How fast do we get our cash back?

B. Risk (The Danger)

High returns usually come with high risk. We must ask: "What is the worst-case scenario?" Tools include Sensitivity Analysis (asking "What if sales drop by 10%?") and Financial Ratio Analysis (will this strategy make our debt levels too high?).

C. Stakeholder Reactions

Will the shareholders approve? Will the employees go on strike? Will the customers be offended? Use Mendelow’s Matrix here to see if the "Key Players" will support the move.

Quick Review: The 3 R's of Acceptability

1. Returns (Profit/Value)
2. Risk (Probability of failure)
3. Reactions (Stakeholder approval)

3. Feasibility: Can we actually do it?

Feasibility is the "reality check." You might have a suitable, acceptable idea to build a hotel on Mars, but if you don't have a rocket, it isn't feasible!

We evaluate feasibility by looking at our Resources and Competences. A simple way to remember what to check is the 9Ms Framework (or a simplified version):

Money: Do we have the cash or can we borrow it?
Men (People): Do we have the right skills and staff?
Machines (Systems/Tech): Is our technology up to the task?
Materials/Markets: Do we have access to the supply chain?

Don't worry if this seems tricky: In an exam, if a question mentions "lack of skilled staff" or "not enough funding," they are pointing you directly toward a Feasibility issue!

Did you know?

Many start-ups fail not because their ideas aren't Suitable, but because they run out of Money—which is a Feasibility failure!

Comparing the Criteria: A Summary Table

Use this table to quickly distinguish between the three during your revision:

Common Mistakes to Avoid

Mixing up Suitability and Feasibility: Remember, Suitability is about the Environment/Strategy fit; Feasibility is about Internal Resources.
Ignoring Non-Financials: When discussing Acceptability, students often focus only on NPV. Don't forget that Stakeholder Reaction (like ethics or environmental impact) is just as important!
Looking at only one: A strategy must pass all three tests to be viable. If it's suitable and feasible but the owners hate it (not acceptable), it won't happen.

Final Summary: The "Big Picture"

Evaluating options is the bridge between thinking and doing. By using the SAF framework, management can move away from "gut feelings" and toward objective, evidence-based decision-making.

1. Suitability ensures we are solving the right problems.
2. Acceptability ensures we are meeting the expectations of those who matter.
3. Feasibility ensures we have the "tools in the shed" to get the job done.

Keep going! You're doing great. Mastering SAF is a huge step toward passing your E3 exam!

Quick check

Can you answer these now?

Open each question to check the key ideas from this chapter.

What are the three criteria of the SAF framework used to evaluate strategic options?

The three criteria are Suitability, Acceptability, and Feasibility.

What is the primary focus when evaluating a strategy's Suitability?

Suitability focuses on whether the strategy matches the organization's circumstances, mission, and analysis (SWOT/PESTEL).

Which tools can be used to objectively measure the Suitability of a strategy?

Common tools include Ranking against success factors, Decision Trees, and Scenario Analysis.

What does the Acceptability criterion evaluate in the SAF framework?

Acceptability evaluates the expected performance outcomes of a strategy, specifically focusing on Return, Risk, and Stakeholder Reactions.

How is Return typically measured when assessing the Acceptability of a strategy?

Return is measured using financial metrics such as ROCE, NPV, and the Payback Period.

What tools are used to evaluate the Risk component of Acceptability?

Risk is evaluated using Sensitivity Analysis and Financial Ratio Analysis.

Why are Stakeholder Reactions critical to the Acceptability of a strategy?

Strategies can fail if key stakeholders (like shareholders or employees) oppose them, often due to ethical, environmental, or personal concerns.

What is the focus of the Feasibility criterion in strategic evaluation?

Feasibility assesses whether the organization has the Resources and Competences (such as money, people, and technology) to successfully implement the strategy.

What framework can be used to comprehensively check the Feasibility of a strategy?

The 9Ms Framework can be used to audit resources like Money, Men (people), Machines, and Materials.

What is a common mistake when distinguishing between Suitability and Feasibility?

Mixing them up; remember that Suitability is about the strategic fit with the environment, while Feasibility is about internal resource availability.

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