(Answered)-Dakota HeartCare (not the actual name) Background: Dakota - (2025 Updated Original AI-Free Solution

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1. Dakota HeartCare (not the actual name)

Background: Dakota HeartCare (CHC) plans to spend $6 million to transform 6 recreational vehicles (rv?s) into health labs. The rv?s will tour the? Dakotas offering a $99 heart-health workup to anybody who wants one. The workup consists of a detailed questionnaire and some basic diagnostics (blood pressure, ultrasound of the ankle (yep, ankle), cholesterol test, etc). Using the information from the questionnaire and the diagnostics, a statistical analysis will determine the customer?s risk of a heart ?malfunction? in the next year, the next three years, and the next five years. Similar question-based analyses are free online; expensive diagnostic-based analyses are available from doctors; DHC merges the two. None of the statistical analyses can outperform a coin-flip.

1. 1. Compared to their competitors, does DHC have a benefit position, a cost position, both or neither? If they have a benefit and/or cost position, what is/are the source(s) of their advantage? Be explicit and complete in identifying the source(s) of their advantage.

1. 1. How should they pursue their position?profit margin or market share. Why?

1. 1. DHC debated entering with one lab or with 20 labs. Their study of the markets suggested that 20 labs could survive (albeit at low to zero profit) in the market. DHC also believed the advantage of entering with one lab is that the main investor would lose less money if the firm failed. In the end, they chose 6 labs, as a sort of compromise between the two extremes. Explain how DHC?s choice of 6 labs will affect the behavior of their actual or potential rivals, and thus the sustainability of their comparative advantage. Be sure to explicitly state whether you are assuming Cournot or Bertrand competition.

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1. 1. DHC claims that one factor in the decision to go with 6 labs is that 6 labs will deter entry by others. They provided the following data to support their claim (the numbers are expected profits):

	The Competition
CHC		Do Not Enter	Enter & Compete
5 or fewer labs	30, 0	5, 10
6 or more labs	20, 0	2,2

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Note that DHC has not yet entered the market, so their decision is not yet determined. Given that, what is the outcome of this game?

Is the outcome a Nash Equilibrium?

If DHC goes through with the decision to enter with 6 labs as the first mover, what do you expect to happen in the market?what will the competition do, and where will the market eventually settle?

1. 1. Thinking only of DHC?s relationship with their competitors, recommend some pricing strategies DHC could use to create cooperative pricing. What factors will make DHC?s attempt to create cooperative pricing easier, and what factors will make the attempt more difficult? Do you think DHC will succeed in creating cooperative pricing?

DHC?s profit-generating customers are insurance companies, hospitals, marketers, etc: DHC will sell their patients? medical information (after doing just enough to follow privacy laws). Think of DHC as a data collector for insurance companies, and as a recruiter for hospitals (DHC finds ill patients and refers them to the highest bidder?although, of course, not in those terms). The $99 heart ?analysis? provides a cover story to their data collection. (Don?t worry about the legality or ethics?it is both legal and legal). Moreover, DHC?s goal isn?t to stay in business: they want to be bought out by a major health provider (a local example would be Baptist Health)?in short, DHC wants to be integrated into an existing firm. The obvious question: why would a firm like Baptist decide to integrate with DHC?why not just keeping buying DHC?s information and referrals? What factors should Baptist consider in deciding to vertically integrate? What can DHC do to increase their chances of being integrated into Baptist? Be sure to consider the role specific factors may play in this particular integration decision.

DAKOTA HEARTCARE MERGER STRATEGY

Dakota Heartcare Merger Strategy
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DAKOTA HEARTCARE MERGER STRATEGY

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DHC Mergers regularly prompt an expanded worth era for the...