Wide Economic Moat


DEFINITION of 'Wide Economic Moat'

A type of sustainable competitive advantage that a business possesses that makes it difficult for rivals to wear down its market share and profit. The term is derived from the water filled moats that surrounded medieval castles. The wider the moat, the more difficult it would be for an invader to reach the castle.

BREAKING DOWN 'Wide Economic Moat'

Businesses that possess at least one factor of Porter's 5 forces model would possess a wide economic moat. For example, a business that holds an exclusive patent for the creation of a miracle drug would effectively keep potential competitors out of its business. Having few or no competitors would allow the company to continually generate high levels of profit. Legendary investor Warren Buffett is renowned for his philosophy of investing in businesses with wide economic moat.

  1. Warren Buffett

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  2. Economies Of Scale

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  3. Switching Costs

    The negative costs that a consumer incurs as a result of changing ...
  4. Porter's 5 Forces

    Named after Michael E. Porter, this model identifies and analyzes ...
  5. Economic Moat

    The competitive advantage that one company has over other companies ...
  6. Patent

    A government license that gives the holder exclusive rights to ...
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