Buffett has always emphasized the concept of “moat” in his investment. He believes that companies with a moat can effectively. Defend against competitors and obtain better value returns. While companies without a moat will live very hard. In his view. There are four types of moats for an enterprise: cost advantages. Network effects intangible assets and high switching costs. Cost advantages are mainly brought about by scale effects or monopoly resources. The larger the scale of an enterprise the lower the product cost. Because the scale will bring down the purchase cost and the skilled workers. The fine division of labor the standardization and automation. Of the production process will also shorten the production of a single product. time.
Cost advantages
This is the competitive advantage possessed by leading brands in most industries. Scale leads to a leading position in total cost. The network effect refers to the focusing effect of Internet products. The more users, the greater the value of the product, and the greater the value of the product, the more users it can attract. Take Taobao, for example, the more buyers there are, the more valuable it is to sellers, because it can bring more sales and profits. The more sellers, the Bulgaria Email List greater the value to buyers, because they can choose products that are more in line with their own wishes. More buyers will attract more sellers, and more sellers will attract more buyers. This forms a positive cycle of growth flywheel, which grows bigger and bigger like a snowball.
Intangible assets
In 2023 will the advertising industry still be good? Amazon’s growth flywheel Intangible assets mainly refer to brands and patented technologies. Today’s companies are very on brand building. Brands can stick to customers and make them loyal, so they won’t easily switch families. High switching costs mean that consumers are used to your product, and the cost BWB Directory of switching to competitors is relatively high, the process is cumbersome, or they need to relearn. For example, if you are used to Apple’s mobile phone system, you need to re-adapt to using Android; your friends, colleagues, and partners are all on WeChat, and it is difficult for you to switch to other social software.
