What are moat maps?
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"Moats" in the business context refer to sustainable competitive advantages that protect a company from its competitors. This concept, originally popularized by Warren Buffett, describes how a firm can maintain high profitability and fend off competition.
emphasizes that moats are integral to achieving high returns on invested capital. He categorizes moats based on their characteristics in evaluating various companies 1.
further explains that moats consist of a benefit that provides a better outcome (like lower costs or higher prices) and a barrier that prevents others from easily replicating that advantage 2. He uses the example of Netflix's user interface development, noting that while heavily invested in, it wasn't alone sufficient to ensure a moat because it could be mimicked by competitors like Blockbuster.
defines moats as sustainable competitive edges that enable companies to offer products that are difficult for competitors to match, which is crucial in maintaining high profit margins over time 3.
In summary, moats allow companies to maintain superior profitability through unique advantages that are difficult for others to replicate, protecting them from competitive pressures and market erosion.
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