Problem:
Company X is a four year-old advertising agency that has grown rapidly in the last two years. The company specializes in marketing for professional and semi-professional sports teams, but in the last two years they have branched out to additional markets, such as fitness clothing, energy foods, and sports equipment.
Company X has been successful enough that they now have the option of buying out a competing advertising agency, Company Y. That company is a long-time leader in marketing in areas similar to Company X. However, they also have many clients in new markets.
What are the opportunity costs if Company X executives decided to acquire Company Y?
What are the opportunity costs if Company X executives decide not to acquire Company Y?
Why do you think considering opportunity costs is such an important part of business decision-making?