Approaches for Creating a Moat

Nugget of the week

Approaches: Companies can enhance their competitive position by maximizing demand for their products or services or by minimizing (or entirely preventing) the supply of similar offerings from competitors.

Demand: Customers prefer a company’s products and services if they are either comparable but cheaper (cost advantages) or similarly priced yet better (differentiation) than those offered by the competition. Certain products and services become more attractive to new customers as the customer base grows (network effects). Some companies’ existing customers become locked in (switching costs).

Supply: Companies can keep their competition at bay if there are barriers to entry to their business (intangible assets).