Determine a Company's Type of Cost Advantage

Action of the week

Background: Striving for a cost-advantage moat is a strategy employed by many companies. Cost advantages based on operational efficiencies are frequently found in large-scale retail, transportation, logistics and food companies, among others. Low-cost producer moats are common in commodity industries where product differentiation is difficult to achieve.

Rationale: Understanding the type of cost advantage that a company may possess over its competition is crucial for investors to evaluate its long-term prospects.

Action: Exxon Mobil Corporation (XOM) is an oil and natural gas producer with a long history of exceptional profitability. Determine the type of cost advantage it holds over its competitors.