The SFA matrix is a framework that helps businesses evaluate strategic options. Gerry Johnson and Kevan Scholes created the SFA matrix to help businesses evaluate their strategic options before committing. Evaluation of strategic opportunities is performed by considering three criteria that make up the SFA acronym: suitability, feasibility, and acceptability.
With many strategic options to choose from, it can sometimes be hard for a business to determine which will produce the best outcome. Most choices have significant and far-reaching consequences for the business or the individual, so it’s important to choose wisely.
To help businesses evaluate their strategic options before committing, Gerry Johnson and Kevan Scholes created the SFA matrix. Evaluation of strategic opportunities is performed by considering three criteria that make up the SFA acronym.
Suitability
The most important factor in a strategic decision. Will the strategy achieve what the business wants it to achieve? Does it address key opportunities and threats? Suitability encompasses a broad range of criteria such as environmental, market, and expectational suitability.
Feasibility
Can the business execute the strategy effectively? Can it be financed? Are the right skills or expertise in place? Can resources be obtained in adequate quantities? Is the structure of the organization a good fit for the strategic plan? Are there moral, ethical, or legal concerns?
Acceptability
Does the proposed strategy meet stakeholder expectations? In other words, is the level of financial or reputational risk acceptable? Do potential project outcomes justify the expense? What will be the impact on capital structure, and will any function of the individual, group, or department be altered significantly?
Use of the SFA matrix normally takes place at the end of strategic planning once a strategic analysis has been performed. As a result, complementary frameworks such as Five Forces, SWOT, PESTLE, and SOAR are ideal.
Evaluating strategic opportunities using the SFA matrix
Evaluating opportunities involves scoring each of them against the three criteria listed above.
Here is the process in more detail:
Define key elements for each of the three criteria
Depending on the industry, each business should qualitatively define several key elements. A logging company, for example, will list environmental impact as a key suitability element and access to electricity as a key feasibility element.
Using a spreadsheet, list each element under its relevant criteria heading in a column on the left-hand side.
Weight each element according to importance. The logging company may assign a weight of 0.7 to low environmental impact and a weight of 0.3 for market demand. Ensure that the sum of all weights for each of suitability, feasibility, and acceptability adds up to 1.
Then, score every key element against each strategic opportunity using a scale of 1 to 10. For example, the logging company may assign the environmental impact of clear-cut logging (a strategy option) a score of 3. On the other hand, more environmentally friendly selective logging may be given an impact score of 8.
Multiply the weight of each element by the score assigned in step four. Selective logging is a low environmental impact strategy, so it would receive a score of 8 x 0.7 = 5.6. Then, add each score together. The strategy with the highest score is deemed the most suitable, but teams must avoid combining the best parts of multiple strategies into one.
Some extra guidance on evaluating suitability
Many businesses will find the evaluation of feasibility and acceptability straightforward. However, evaluating suitability can be more problematic.
To make this process easier, it can be useful to consider suitability in terms of three factors.
Strategic logic
Since the 1950s, strategic logic has been quantified by rational or economic assessments that compare potential strategies with a firm’s market position and core competencies. While not an exhaustive list, several methods are used to establish the logic behind a strategy:
Portfolio analysis– this provides clarity on how a potential strategy may help improve the mix or balance of activities in a company.
Value system analysis – an analysis to determine how a potential strategy may improve value system performance. One example is a synergy assessment, which looks at how extra benefit can be derived by connecting activities outside the value system.
Life cycle analysis – these analyses determine where an initiative is likely to be suitable for a specific product life cycle stage. It also considers the relative positional strength of a company in the market.
Cultural fit
This measures the extent to which a strategy will be assimilated within the organization. Cultural fit is not the most important determiner of whether a strategy is accepted. Instead, such strategies must be able to shape and influence culture according to whether or not the company wants to introduce a new way of operating.
If the firm is not seeking to adopt a new paradigm, the best strategies are those that are the most easily assimilated. If, on the other hand, the firm is looking to implement a new culture, the SFA matrix can be used to formulate a strategy that will help employees adapt to the change.
Research evidence
Research evidence clarifies the concrete relationship between strategy choice and organizational performance. This relationship has been studied extensively since the 1970s, with a landmark study of over 3,000 businesses by the Strategic Planning Institute (SPI) just one example.
Collectively, these studies have arrived at several important conclusions for a business assessing suitability in terms of diversification and performance:
Diversification is not always profitable and is difficult to achieve in practice. Above a certain threshold, profit potential is reduced by increasing complexity.
Similarly, the benefits of synergy vis-à-vis diversification make sense on paper but are harder to achieve in the real world. This is particularly true of companies that attempt to diversify through acquisitions.
The success of any diversification initiative relies on a set of circumstances unique to each company, such as market structure, company size, or the level of industry growth. It was also found that some initiatives are more successful when enacted over a longer period.
Key takeaways:
The SFA matrix enables businesses to evaluate and then select a strategic option from a range of choices. It was created by Gerry Johnson and Kevan Scholes.
The SFA matrix considers three key criteria of strategy development: suitability, feasibility, and acceptability. Suitability may be the hardest of three criteria to assess accurately.
The SFA matrix calculates weighted scores for predetermined elements the business deems important. Although the elements can be adapted depending on the industry, there must be standardization in scoring and in element identification itself.
Key Highlights:
Definition of SFA Matrix: The SFA (Suitability, Feasibility, Acceptability) matrix is a framework designed by Gerry Johnson and Kevan Scholes to help businesses assess and evaluate strategic options before making decisions. It involves evaluating potential strategies based on three key criteria: suitability, feasibility, and acceptability.
Purpose of SFA Matrix:
Businesses face multiple strategic options, and the SFA matrix assists in making informed decisions by systematically evaluating these options.
The SFA matrix is typically applied after strategic analysis, utilizing complementary frameworks like Five Forces, SWOT, PESTLE, and SOAR.
SFA Criteria:
Suitability: Determines if a strategy aligns with the business’s goals and addresses opportunities and threats. It encompasses environmental, market, and expectational suitability.
Feasibility: Assesses if the strategy can be executed effectively, considering factors like financing, resources, organizational structure, and ethical considerations.
Acceptability: Evaluates if the strategy meets stakeholder expectations and financial/reputational risk levels. It considers impacts on capital structure and functional aspects.
Process of Using the SFA Matrix:
Define Key Elements: Qualitatively define key elements for each criterion based on the industry and business context.
Assign Weights: Assign relative weights to each criterion, reflecting their importance. Total weights for each criterion sum up to 1.
Construct Matrix: Create a matrix with decision alternatives as rows and criteria as columns.
Evaluate Alternatives: Score each alternative against criteria using a consistent rating scale (e.g., 1-10).
Calculate Weighted Scores: Multiply element scores by their respective weights and sum to get total scores for each alternative.
Guidelines for Evaluating Suitability:
Strategic Logic: Analyze the rational or economic basis of the strategy by methods like portfolio analysis, value system analysis, and life cycle analysis.
Cultural Fit: Assess how well the strategy aligns with the organization’s culture and whether it requires adapting or shaping the culture.
Research Evidence: Consider research findings on strategy-choice and organizational performance relationships, especially regarding diversification and synergy.
Key Takeaways:
The SFA matrix is a valuable tool for evaluating and selecting strategic options based on suitability, feasibility, and acceptability.
It involves defining key elements, assigning weights, evaluating alternatives, and calculating weighted scores.
Suitability assessment involves considering strategic logic, cultural fit, and research evidence.
While assessing suitability might be challenging, the SFA matrix aids businesses in making strategic decisions aligned with their goals and stakeholder expectations.
Related Frameworks
Definition
Focus
Application
SFA (Strategic Factor Analysis) Matrix
A strategic planning tool that identifies and evaluates the most important strategic factors affecting an organization’s success in its industry. The SFA Matrix involves assessing external opportunities and threats (O/T factors) and internal strengths and weaknesses (S/W factors).
Focuses on analyzing key internal and external factors to determine the strategic position of an organization relative to its competitors, informing strategic decisions and actions to capitalize on strengths and opportunities while addressing weaknesses and threats.
Strategic Planning, Competitive Analysis, Industry Analysis
SWOT Analysis
A strategic planning tool used to identify Strengths, Weaknesses, Opportunities, and Threats related to a business venture or project. SWOT analysis helps organizations assess internal capabilities and external factors to formulate strategies and make informed decisions.
Focuses on analyzing internal strengths and weaknesses and external opportunities and threats to develop strategies that leverage strengths, mitigate weaknesses, capitalize on opportunities, and address threats effectively.
Strategic Planning, Business Analysis, Decision-making
PESTLE Analysis
A strategic tool used to analyze and understand the external macro-environmental factors that impact an organization or market. PESTLE stands for Political, Economic, Social, Technological, Legal, and Environmental factors, providing insights into the broader context of business operations.
Focuses on identifying and evaluating external factors and trends in the business environment to anticipate opportunities, threats, and regulatory challenges, guiding strategic planning and decision-making.
A framework developed by Michael Porter to analyze the competitive forces within an industry. Porter identified five forces: Threat of New Entrants, Bargaining Power of Buyers, Bargaining Power of Suppliers, Threat of Substitute Products, and Intensity of Competitive Rivalry.
Focuses on assessing the competitive dynamics and attractiveness of an industry by analyzing the forces that shape competition, helping organizations understand their competitive position and formulate strategies for sustainable competitive advantage.
Industry Analysis, Competitive Strategy, Market Positioning
Scenario Analysis
A strategic planning technique used to explore alternative future scenarios and their potential implications on business outcomes. Scenario analysis involves developing and analyzing multiple plausible scenarios based on different assumptions or driving forces.
Focuses on understanding and planning for uncertainty by exploring different future scenarios, evaluating their potential impacts, and developing strategies to adapt and respond effectively to changing conditions or events.
Strategic Planning, Risk Management, Business Continuity Planning
McKinsey 7S Framework
A management model developed by McKinsey & Company that identifies seven internal elements critical to organizational effectiveness: Strategy, Structure, Systems, Shared Values, Skills, Style, and Staff. The 7S Framework helps organizations diagnose alignment issues and drive change.
Focuses on analyzing the interrelationships between strategy, structure, systems, shared values, skills, style, and staff within an organization to diagnose alignment issues and drive organizational change and performance improvement.
A strategic planning approach that emphasizes creating uncontested market space by innovating and offering unique value propositions. Blue ocean strategy focuses on simultaneously reducing costs and increasing value for customers to create new demand and unlock new market opportunities.
Focuses on identifying and tapping into new market spaces with limited competition, allowing companies to differentiate themselves and capture uncontested market share, driving sustainable growth and profitability.
A strategic analysis framework that examines the activities and processes within a company’s value chain to identify sources of competitive advantage and opportunities for cost reduction or differentiation. Value chain analysis categorizes activities as primary or support functions.
Focuses on understanding the sequence of activities and processes involved in delivering value to customers, identifying areas for optimization, cost reduction, or value enhancement to strengthen the company’s competitive position.
Strategic Planning, Process Optimization, Cost Management
Case Study
Elements
Description
Analysis
Examples
Suitability
The extent to which a strategic option aligns with the organization’s strengths and capitalizes on market opportunities.
Option 1: High suitability because it aligns well with our strengths and effectively addresses market opportunities.
Expanding our e-commerce platform to new markets with high online shopping adoption.
Option 2: Low suitability as it requires significant resources despite alignment with strengths.
Developing a new product line that requires substantial R&D and production resources.
Option 3: High suitability as it fits our capabilities, even though the potential benefits may be limited.
Launching a loyalty program to retain existing customers and enhance brand loyalty.
Option 4: Medium suitability, as it moderately aligns with strengths and resource availability.
Diversifying into a related market segment with moderate growth potential.
Feasibility
The practicality and resource availability to implement a strategic option successfully.
Option 1: Medium feasibility because it may require moderate resources.
Expanding our online presence and marketing efforts to reach new customer segments.
Option 2: High feasibility despite resource requirements.
Investing in state-of-the-art machinery to improve manufacturing efficiency.
Option 3: Low feasibility due to limited potential benefits.
Launching a high-cost marketing campaign for a niche product with a small target audience.
Option 4: Medium feasibility, considering moderate alignment with resources.
Upgrading our existing IT infrastructure to support future growth.
Acceptability
The justifiability of the effort required for a strategic option in terms of expected returns and other organizational factors.
Option 1: High acceptability due to its alignment with strengths and potential for significant gains.
Implementing a customer-centric service model to enhance customer retention and profitability.
Option 2: High acceptability despite resource challenges, given its alignment and potential.
Undertaking an aggressive marketing campaign to capture a larger market share.
Option 3: Low acceptability as the benefits may not justify the effort.
Pursuing an acquisition of a smaller competitor with limited synergies.
Option 4: Medium acceptability, balancing alignment and resource considerations.
Expanding our product portfolio to include complementary offerings with moderate growth potential.
The SFA matrix is a framework that helps businesses evaluate strategic options. Gerry Johnson and Kevan Scholes created the SFA matrix to help businesses evaluate their strategic options before committing. Evaluation of strategic opportunities is performed by considering three criteria that make up the SFA acronym: suitability, feasibility, and acceptability.
The Hoshin Kanri X-Matrix is a strategy deployment tool that helps businesses achieve goals over the short and long term. Hoshin Kanri is a method that seeks to bridge the gap between strategy and execution. Strategic objectives are clearly defined and the goals of every level of the organization are aligned. With everyone moving in the same direction, process coordination and decision-making ability are strengthened.
The Kepner-Tregoe matrix was created by management consultants Charles H. Kepner and Benjamin B. Tregoe in the 1960s, developed to help businesses navigate the decisions they make daily, the Kepner-Tregoe matrix is a root cause analysis used in organizational decision making.
The Eisenhower Matrix is a tool that helps businesses prioritize tasks based on their urgency and importance, named after Dwight D. Eisenhower, President of the United States from 1953 to 1961, the matrix helps businesses and individuals differentiate between the urgent and important to prevent urgent things (seemingly useful in the short-term) cannibalize important things (critical for long-term success).
An action priority matrix is a productivity tool that helps businesses prioritize certain tasks and objectives over others. The matrix itself is represented by four quadrants on a typical cartesian graph. These quadrants are plotted against the effort required to complete a task (x-axis) and the impact (benefit) that each task brings once completed (y-axis). This matrix helps assess what projects need to be undertaken and the potential impact for each.
The TOWS Matrix is an acronym for Threats, Opportunities, Weaknesses, and Strengths. The matrix is a variation on the SWOT Analysis, and it seeks to address criticisms of the SWOT Analysis regarding its inability to show relationships between the various categories.
The GE McKinsey Matrix was developed in the 1970s after General Electric asked its consultant McKinsey to develop a portfolio management model. This matrix is a strategy tool that provides guidance on how a corporation should prioritize its investments among its business units, leading to three possible scenarios: invest, protect, harvest, and divest.
In the 1970s, Bruce D. Henderson, founder of the Boston Consulting Group, came up with The Product Portfolio (aka BCG Matrix, or Growth-share Matrix), which would look at a successful business product portfolio based on potential growth and market shares. It divided products into four main categories: cash cows, pets (dogs), question marks, and stars.
In the FourWeekMBA growth matrix, you can apply growth for existing customers by tackling the same problems (gain mode). Or by tackling existing problems, for new customers (expand mode). Or by tackling new problems for existing customers (extend mode). Or perhaps by tackling whole new problems for new customers (reinvent mode).
You can use the Ansoff Matrix as a strategic framework to understand what growthstrategy is more suited based on the market context. Developed by mathematician and business manager Igor Ansoff, it assumes a growthstrategy can be derived by whether the market is new or existing, and the product is new or existing.
The Kraljic matrix is a framework that analyzes and classifies a company’s supplier base.
Kraljic’s matrix is used by purchasers to maximize supply security/minimize supply risk and reduce costs. In so doing, it encourages them to see procurement as a strategic activity and not one that is simply transactional.
The Kraljic matrix is divided into four quadrants based on varying degrees of supply risk and profit impact. Each quadrant defines a type of supply item and a strategy that reduces risk and cost. The quadrants encompass leverage items, bottleneck items, non-critical items, and strategic items.
The product-process matrix was introduced in two articles published in the Harvard Business Review in 1979. Developed by Robert H. Hayes and Steven C. Wheelwright, the matrix assesses the relationship between The stages of the product life cycle (from ideation to growth or decline) and The stages of the process (technological) life cycle.
The Mendelow stakeholder matrix is a framework used to analyze stakeholder attitudes and expectations and their potential impact on business decisions.
A requirements traceability matrix (RTM) is a vital part of the lifecycle of any embedded system, helping organizations ensure their products are safe and meet intended standards. While the matrix has long been associated with medicine, technology, and engineering, the approach works well for any project regardless of industry. A requirements traceability matrix is a tool used to identify and maintain the status of project requirements and deliverables.
The value/effort matrix is a feature prioritization model used to build effective product roadmaps. The value/effort matrix allows product managers to prioritize their product backlog using a confident, structured approach. The product team learns how to plan an effective roadmap, identify boundaries of work, and differentiate between needs and wants.
A decision matrix is a decision-making tool that evaluates and prioritizes a list of options. Decision matrices are useful when: A list of options must be trimmed to a single choice. A decision must be made based on several criteria. A list of criteria has been made manageable through the process of elimination.
The grand strategy matrix was created by American business theorist Paul Joseph DiMaggio in 1980. The matrix, which first appeared in the Strategic Management Journal, was initially used as a strategic option tool for managers. The grand strategy matrix helps organizations develop feasible alternative strategies based on their competitive position and the growth of their industry.
Gennaro is the creator of FourWeekMBA, which reached about four million business people, comprising C-level executives, investors, analysts, product managers, and aspiring digital entrepreneurs in 2022 alone | He is also Director of Sales for a high-tech scaleup in the AI Industry | In 2012, Gennaro earned an International MBA with emphasis on Corporate Finance and Business Strategy.
