Company which has a wide "moat" or competitive advantage cannot run away from the 3 principle. It is either
1. The company must has a special product that cannot easily replace by other product, or
2. The company must has a special service that nobody can get into their market, or
3. The company must has a scale of economy that its cost is the lowest in the industries.
Why a company need the wide "moat"?
The companies have the wide "moat" cannot easily replace by other companies so that they can enjoy and capture the greater margin, bigger share market as other competitors cannot easily fight with them.
Imagine these type of companies have greater margin or lower cost, so thats mean their competitors hard to decrease their product price to fight with them. So as the time goes, the competitors' market is getting small and small and at the end eat up by the wide "moat" company.
This is the reason why warren buffett is so stress in invest in these type of companies and apply the strategy buy and hold. Because he knows these type of companies have the competitive advantage and when the time goes on, their advantage will become stronger and stronger and those disadvantage companies will be beaten out.
1. The company must has a special product that cannot easily replace by other product, or
2. The company must has a special service that nobody can get into their market, or
3. The company must has a scale of economy that its cost is the lowest in the industries.
Why a company need the wide "moat"?
The companies have the wide "moat" cannot easily replace by other companies so that they can enjoy and capture the greater margin, bigger share market as other competitors cannot easily fight with them.
Imagine these type of companies have greater margin or lower cost, so thats mean their competitors hard to decrease their product price to fight with them. So as the time goes, the competitors' market is getting small and small and at the end eat up by the wide "moat" company.
This is the reason why warren buffett is so stress in invest in these type of companies and apply the strategy buy and hold. Because he knows these type of companies have the competitive advantage and when the time goes on, their advantage will become stronger and stronger and those disadvantage companies will be beaten out.
