If an EMR provider rolls out a complementary product, its interoperability within their system makes it a tempting choice for current clients. A Wide Moat. In Richard Rumelt’s Good Strategy Bad Strategy: The Difference and Why It Matters, he recounts a favorite (and recurring) discussion with his students: What makes Walmart successful? Examples of well-known brands that do not have an economic moat: MakeMyTrip, Flipkart, Videocon, etc. Profitability can be sorted out later, as was the case with WhatsApp. There are two ways to build a moat: Still, not everyone thinks moats are a good idea. Common components of martech stacks become prerequisites (or, at least, preferred skill sets) for many positions, our current marketing operations role included: Our current stack: Customer.io, Intercom, Hull.io, WordPress, Heap, Hubspot Sales, Mailshake, Clearbit, Unbounce, Google Analytics, Google Tag Manager, Metorik. You needn’t decide on a company with multiple moats to think about that it is a potential investment candidate. Wal-Mart, for example, has built an economic moat based on its low pricing. The company limits costs through a management and distribution structure that serves multiple stores in a geographic area. For example, I’m reluctant to switch streaming music providers. ), “Intangible assets constitute patents and trademarks,” writes Alex Graham, “but also hard-earned competitive advantages, such as brand names and culture.”. It’s worked out: Moats built on efficient scale apply to a small number of businesses, like the aforementioned freight rail operators. Firms that offer a product that is integral to their customers’ operations and where the product is complex, making retraining a major cost and inconvenience, have a powerful economic moat. And we want to throw crocodiles and sharks and everything else, gators, I guess, into the moat to keep away competitors.”. Spotify’s recommendations are useful now that I’ve spent thousands of hours listening. Types of Moats One final thought about economic moats: It is possible for some companies to have more than one type of moat. You can’t wake up overnight and get that. Efficient scale moats depend on limited demand and geographic dominance. Zuckerberg paid, in other words, for the network-based moat:  “WhatsApp is on a path to connect 1 billion people. I send a weekly newsletter with what's on my mind on this stuff. It is very easy to assume that an organization with a high market share also incorporates a sustainable competitive advantage—how else wouldn’t it have acquired such a giant chunk of the market? The following is a list of some of the different types of economic moats.. Geographical. Economic Moat: Intangible Assets And Brand Loyalty The assets possessed by a company that one cannot readily see or touch are called intangible assets, with examples being company-owned patents, trademarks and brand loyalty. This system remains in place today. To a large degree, brand power creates demand for those chips and secures their placement on store shelves. Surgeons encounter these switching costs when they train to do procedures using specific medical devices, such as the artificial joint products from medical-device companies Zimmer (ZMH) or Stryker (SYK). Followers are non-transferable capital that users store on the platform. The concept of Economic moat was popularized by Warren Buffett, the concept refers to a business’ ability to gain a competitive advantage over its competitors, in order to protect its market share and long term profits from competing firms. You can build a moat that jealously guards an advantage without extending it. Sources of Economic Moats: Cost Advantages. Building a competing hospital in a market already served by a sprawling system won’t double procedures or ER admissions. Uber isn’t profitable either. “It’s nice, sort of quaint, in a vestigial way. https://t.co/tAKT5yAd3p. Money. But this type of economic moat can be very powerful and long-lasting, so it’s worth taking the time to seek it out. The company's investment in advertising and marketing distinguishes its products on store shelves and allows PepsiCo to command premium prices. One of the interesting things that I found in the study looking at the sources of economic moat is that the network-effect companies actually have the least stability in terms of their earnings. Economic Moat: Cost Advantage. They're…, In digital analytics, it’s all about asking the right questions. It ought to get one moat that appears hardest to mix and one that’s sustainable lengthy-term. If you left your provider, you lost your phone number. The search for high-quality starts with wide-moat stocks. A year ago, Buffett and Elon Musk got into a fight over candy. The idea of an economic moat refers to how likely a company is to keep competitors at bay for an extended period. Until 2004, when the U.S. Federal Communications Commission rolled out Wireless Local Number Portability, cell phone service providers retained customers with high switching costs. Berkshire Hathaway kryptonite …. But other forms of governmental protection have a small and temporary economic moat. As Buffett suggests, they’re more durable than other competitive advantages. Competitors are unlikely to invest the time and energy necessary to compete in a niche market. When geography is the determining factor, efficient scale relies on mergers and acquisitions. Some companies have an advantage over competitors because of intangible, or unique nonphysical assets. That’s my moat. The moat around their business is the two million links into their website. 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