Summary:
This article is about Scotiabank’s decision to purchase a Brazilian bank and expanding their services across South America. The name of the South American bank is “Dresdner Bank Brasil S.A”, and at the end of 2009, it was reported that this bank had assets around $400 million US and about 50 employees. The justification of Scotiabank’s purchase is to become the only Canadian bank in Brazil with a multiple bank license and to increase their presence in the oil and gas, power and mining sectors. The price of this transaction has not been announced, because Scotiabank claimed it to be “not financially material”, however, Mike Durland co-CEO of Scotia Capital, claims this trade to be a “tremendous potential for growth”.
Connections:
This article is a prime example of one of the main ideas of chapter 1, opportunity costs. Basically, opportunity costs are the expenses taken when performing any decision. For example; when you suddenly have a craving for pizza, the money you spend on your pizza, could have been invested in other things, such as investing. In fact, we run into opportunity costs every day, some deal with spending and losing positional money and some deal with gaining and losing other things. In the article, Scotiabank has suffered an opportunity cost by deciding to purchase Dresdner Bank Brasil S.A. The money Scotiabank used to purchase the Brazilian bank could’ve been doubling its value through investment. Therefore, Scotiabank has made a decision to purchase a Brazilian based company, and suffered an opportunity cost to use that money elsewhere.
Reflection:
Associating the article with the concept of opportunity costs, gave me a new perspective on life. I am now aware that everything I do, no matter what choice I make, there will always be an opportunity cost. I can also understand why major companies make decisions over the course of weeks or months, instead of instantly on the spot. In business, every decision comes with consequences or costs, and with that knowledge, every ripple must be analyzed to find the most efficient and least costly way to perform. With a new mind set, I am now able to tackle choices with a more business approach, rather than being a typical consumer.
