Brand: How Patagonia grew by understanding its customer identity.Cost advantage: How Walmart has kept prices low by taking power away from individual stores.Cost advantage: How Amazon Web Services built an impenetrable economy of scale.Cost advantage: Why GEICO going D2C made them Warren Buffett’s favorite stock.Sunk cost: The business model that made Gillette a $57B company.Switching cost: How Slack retains users by being an “enterprise social network”.Switching cost: Why ADP is still America’s biggest provider of payroll services.Switching cost: How IBM used the psychology of fear to own back-end technology for decades.Platform: How treating EVs as a two-sided platform helps Tesla maintain a wide moat.Platform: How Facebook’s control of the social graph made it hyper-durable.Platform: The OS that made Apple a $1T company.Data: How Google used its search expertise to build a wide data moat.Marketplace: How Airbnb‘s massive network of hosts and guests makes it hard to ignore.Marketplace: How Uber dominated ride-sharing by owning supply and demand.Marketplace: How OpenTable created a monopoly by giving restaurants a ‘single-player mode’.Marketplace: The virtuous circle that made Amazon an $850B business.Many of these companies could fit into multiple categories of business moat, even though we only list one per company. The examples below were chosen according to criteria such as size, business success, and ability to illustrate the mechanics and advantages of a particular type of business moat. The company has since strengthened that moat by putting that advantage to work in transportation, shopping, and most importantly, advertising.īelow, we look into 25 business moat examples and dive into how they work. Google, for example, started its moat by developing a better algorithm for indexing and searching the internet. Today, however, the most durable moats are being built on different types of advantages, such as network effects, data, and repeat engagement within a product ecosystem.
Eventually, the company controlled about 90% of all the refineries and pipelines in the United States and could set its own prices. Standard Oil, for example, built its monopoly by buying up smaller competitor refineries and building a global distribution network. In the 20th century, the biggest companies in the world were built on moats of economies of scale or government. In return, they can receive customer loyalty, pricing power, and legal protections that make it difficult for other companies to compete with them.
“The key… is not assessing how much an industry is going to affect society, or how much it will grow, but rather determining the competitive advantage of any given company and, above all, the durability of that advantage.”Ĭompanies can build moats by strengthening their brands, achieving economies of scale, or even lobbying for special status from the government. Warren Buffett helped popularize the concept, saying a company’s moat (or lack thereof) means everything when deciding to invest in it:
What do companies like Amazon, Uber, and Starbucks have in common?Īmong several shared characteristics, these companies thrive by understanding, building, and strengthening their business moats - the key competitive advantages that set them apart.
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