What are economic moats?

Economic moats refer to the competitive advantages that protect a company from its competitors, allowing it to maintain its market position and profitability over time. The concept is rooted in the idea that companies need to have certain durable advantages that create barriers to entry for others in the industry. These advantages can take various forms, such as brand loyalty, cost advantages, network effects, patents, or exclusive access to the distribution channels.

A strong economic moat enables a company to sustain high profit margins and fend off competitive threats, contributing to long-term success. For example, a well-recognized brand that enjoys a loyal customer base can fend off competitors more easily than an unknown brand. This protective feature is essential for investors, as companies with wider economic moats are generally more stable investments and can deliver consistent returns over time.

The other options represent different business concepts. Short-term strategies focus on immediate revenue generation rather than long-term competitive advantage. Methods for enhancing workplace relationships center on internal company dynamics, while risks associated with investing in new markets pertain to market entry challenges rather than sustaining competitive positions.