In a nutshell, business must have this ability to create a competitive edge. This is actually a barrier of protection for business during the fierce competition over others. There are actually ways of developing economic moats which would be further explained in part two of the article. Some key actions you could take are like maintaining advantages in size, cost, intangibles, and high switching costs.
Economic Moat: Overview
All businesses always have the same goal. They want to create a competitive advantage. Competitive advantage is factors that back up companies to produce goods or services that outstand their rivals. In making this goal to happen, they would put a cheaper price for their products than their rivals. It also requires more strategy on branding, cost structure, product quality, network distribution, intellectual property, as well as customer service. To sum up it is an attempt to outstand the business’ rival.
Basically, the most common action requires a company to pick cheap access to raw materials. Learning from successful investors like Warren Buffet, he tends to find companies with solid moats. But those companies are relatively having low share prices. Therefore, a business should have a proper strategy to create competitive advantages. Because most companies are leveraging their products through copying other company’s strategies. Firms that can duplicate methods are sometimes having another operating methods strategy that could win.
