4 categories of Moats that drive the biggest companies
A business moat is a key competitive advantage that sets a company apart from its competitors.
It is what keeps has helped the biggest companies build and defend their markets
From Amazon and Tesla to Starbucks and Coinbase, here are the common types of moats.
#1 Network Effects – The more users it has, the more useful it gets. Think marketplace, social networks, data and platform.
#2 Cost Moats – Think switching costs, sunk costs and cost advantages (ex – Walmart)
#3 Cultural Moats – Brand and what it stands for. Patagonia is a cult favorite in this category
#4 Resource Moats – Think IP, Knowledge or regulatory. Healthcare, Financial services and Crypto benefit hugely here,
Here is one of my favorite – own the platform, own the network
Example – Tesla has built a complex ecosystem of products that reinforce each other’s value, creating a moat out of platform network effects. The moat has electric vehicles at its core. But the company has also built advanced software, offers a charging network, and sells complementary products like in-home energy storage and solar roofs.
For instance, Tesla has also built over 25,000 supercharger stations around the world that Morgan Stanley analyst Adam Jonas considers as a major strategic asset:
The next time you come across a new company think of which of these they operate and use. Do you have any favorites?
Here is the CB Insights article
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Here is a detailed article from #CBInsights on the topic