1. Go to layout and click to edit your blog archive page element.
2. Choose 'drop down menu' (or whatever you want) for your style.
3. Modify it to your liking and then save.
If you want to do it the hard, HTML way, then check out this tutorial.
Custom Drop Down Menus (Intermediate)
Drop Down Menu- Labels (Advanced)
How To Rearrange Sidebar Gadgets