17 Types of Economic Moat
John Spacey, updated on March 18, 2021
An economic moat is a difficult to challenge competitive advantage that has potential to last for an extended period of time. Depending on the industry, an economic moat may last for years, decades or centuries. The following are common types of economic moat.
Barriers To EntryA general term for an industry that is difficult for new competition to enter due to factors such as permits, know-how and capital requirements.
Coercive MonopolyA monopoly that is established by preventing competition with extraordinary powers.
Government MonopolyThe most common type of coercive monopoly that is established by government protection.
InfrastructureUnique or expensive infrastructure that competitors can't match such as hydroelectric dams or railway lines.
Know-howKnowledge, capabilities and skills that are difficult to duplicate.
Legal ProtectionsLegal protections such as licenses, permits and intellectual property.
LocationA unique physical location such as the only hotel with beachfront access to a famous beach or the only data center beside a stock exchange.
Loyal CustomersCustomers who are fans of a particular brand or product line may be difficult or impossible for competitors to influence.
Natural MonopolyAn industry that makes more economic sense as a monopoly such as a region with a single railway line.
Organizational CultureFactors such as norms, behaviors and values that differ widely from one organization to another. Organizational culture is notoriously difficult to transfer or emulate.
ProcessesA business process that competitors have difficulty challenging such as manufacturer that consistently achieves higher quality at a lower price.
RelationshipsRelationships with governments, industry groups, universities, partners and customers.
ReputationReputation can be a potent long term advantage. For example, a law firm with a reputation for winning complex cases may command high fees.
ResourcesUnique access to superior or lower cost resources.
ScaleA firm that has achieved economies of scale is often difficult for smaller firms to challenge.
Switching BarriersA firm with captive customers who find it difficult to switch to a competitor.
TechnologySuperior technology built into products, decision making or process execution.
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