January 10th, 2018
Financial analysis of Abacus
Similarly, the long-term financial status of ABS, as evident from its financial leverage appears to have improved in 2012 as compared to 2011. For instance, the Debt-to-Equity ratio of the entity was negative in 2011, indicating that the long term liabilities were valued above the entity’s total assets (hence a negative equity), as compared to a positive ratio in 2012 (Tompson 4). In this respect, the shareholder’s claim in the entity had improved in 2012 as compared to 2011. This is also evident from the return on equity (ROE), which moved from a negative return (-41.3%) in 2011, to a positive return in 2012 (5.06%) (Tompson 4). Such an improvement could attract more investments in ABS as opposed to 2011 where investors were unlikely to receive any return on their investment, the priority being to service the high debt that the entity had amassed.
The financial position highlighted by the ratios bear significant implication for ABS’s ability to implement the strategy it has adopted in the market. By not holding the largest share in the market, the largest share being held by Micros, ABS has focused on a differentiation rather than a low-cost strategy (Tompson 2). The implication of such a strategic choice is that ABS has to develop customized solutions for its diverse clients to justify the premium payment for its service-bundled, POS system sales. Such is especially the case with indications that poorly implemented POS system in the restaurants could impede service provision by lowering the amount of time that employees spend with the client, which is noted to reduce the level of customer service provided to the customers (Mandabach et al. 116). In this respect, to maintain its status as a premium service provider, ABS needs to have adequate resources that ensure it provides customized solutions to all its clients. For such resources, the entity needs a sound financial basis that allows it to offer services without interruptions. Failure to provide such value-added services alongside its POS system sales implies that the clients (restaurants) will offer their business to the better-priced systems offered by Micro. Due to the superior market share that Micro enjoys compared to ABS (Tompson 2), it would be difficult for ABS to compete effectively on the basis of price, since ABS would not have the required clientele base to support a low-pricing strategy.
A sound financial status for ABS also allows it to develop innovative approaches to POS system sales to rival the brand effects that Micro, the market leader, has established. As noted by Koutroumis, the competitive nature in the restaurant POS system industry has necessitated players to “add many upgraded features to their systems” to win clients over from competitors (cited in Tompson 8). In this respect, being a market leader worldwide and even in Florida, Micros has the resources to offer innovative features, such as the table management system noted by Koutroumis (cited in Tompson 8) and still offer their system at competitive prices. As such, the competitors need to develop strategies that offer a higher value for the client to win the clients that Micros possess. For ABS, such strategy, as noted by the CEO has been to invest in extensive customer education and sales teams training (Tompson 1-2). Without adequate financial resources, the entity would not have the capacity to offer consistent service since it would not be in a position to provide such training consistently to meet the needs occasioned by new technology.
POS systems have been among the technologies that have helped restaurants provide efficient and better service to the customers. One of the VAR of the POS systems in Florida is ABS, an entity whose sound financial position has aided it to implement its differentiation strategy effectively. As depicted in its liquidity and leverage ratios, an improving financial position in 2012 as compared to 2011, offers ABS the resource it needs to support its value-added services that help it price its POS solutions at a higher level compared to the market leader, Micros.
Liddle, Allan J. “POS Selection, Customization a Hot Topic Among Restaurants.” Nation’s Restaurant News 4.27 (2008): 34. ProQuest. Web 30 April 2013.
Mandabach, Keith H. et al. “Who’s in Charge Here.” Journal of Foodservice Business Research 6.3 (2003): 105-117. Academic Search Complete. Web 30 April 2013.
Tompson, Jody. MGMT 431Case Study Competition : The University of Tampa Spring 2013 – Abacus Business Solutions. Tampa, FL: The University of Tampa, 2013. Print.