Question

Silver Screen Cinemas Inc. and Digi Now Inc. are two companies that own and run movie theaters in malls and other commercial areas. While Silver Screen Cinemas Inc. pursues a cost-leadership strategy, Digi Now Inc. adopts a differentiation strategy. Which of the following statements is most likely true of this scenario?
a. Silver Screen Cinemas will charge a premium price for its customers, while Digi Now will implement everyday low pricing.
b. Digi Now and Silver Screen Cinemas will not be direct competitors to each other, and their customer segments will overlap very little.
c. Digi Now will keep its customer service at an acceptable level, while Silver Screen Cinemas will provide superior customer service.
d. Silver Screen Cinemas and Digi Now will use a similar approach to create value for customers by attempting to offer everything to everyone.

Answer 1

Answer: Option B is correct.

Explanation:

The option A is incorrect because Silver screen cinemas are competing on prices which shows that it will charge lower prices than the supplier who is offering differentiated products and is in similar line of business.

Option B is correct because though both of these companies are in similar type of industry but their customer segments are different from each other. Digi Now Inc. is offering services to upper class whereas the Silver Screen Cinemas Inc. is offering to people who have lower purchasing power.

Option C is incorrect because Digi Now Inc. is offering services to upper class, which means it will charge higher prices for superior customer services. Silver Screen Cinemas Inc. will charge lower prices for lower level of customer services.

Option D is incorrect because one is competing on quality whereas the other is competing on cost. So it is impossible for the one who is competing on cost to offer everything to everyone.