Strategic Management: Formulation and Implementation

Strategy Selection Criteria

According to David Aaker, strategic alternatives should be accepted to the degree that they meet the following six criteria:

  1. They are responsive to the external environment.
  2. They involve a sustainable competitive advantage.
  3. The are consistent with other strategies in the organization.
  4. They provide adequate flexibility for the business and the organization.
  5. They are organizationally feasible.

Tests Of A Winning Strategy

Three tests can be used to evaluate the merits of one strategy over another and to gauge how good a strategy is:

The Goodness of Fit Test
A good strategy is well matched to the company's situation - both internal and external factors and its own capabilities and aspirations.
The Competitive Advantage Test
A good strategy leads to sustainable competitive advantage. The bigger the competitive edge that a strategy helps build, the more powerful and effective it is.
The Performance Test
A good strategy boosts company performance. Two kinds of performance improvements are the most telling: gains in profitability and gains in the company's long-term business strength and competitive position.