What is Economic Moat?

Economic moat refers to the competitive advantage a firm has over its peers.It is a structural feature that helps to ring-fence a firms profitability. It enables to earn return on capital lmuch higher than the cost of capital

It is an lentry barriers that prevent other companies or competetors from reducing  a firms profitability.Imagine that  a company has lot of competitors and doesn't has an economic moat. , competitilon will enventually drive return on capital down to the cost or even lower.

Types of Moats

1. Economies of Scale
2. Cheaper access to resources
3. Process-based cost advantages