ECONOMIC MOAT

HOW CAN ANY THE MOST

C O M PA N Y I M P O R TA N T
PROTECT ITSELF ASPECT
FROM WHEN
ITS E VA L U AT I N G
COMPETITORS? A C O M PA N Y

• H Ứ A L Ê Q U A N G
• H U Ỳ N H L Ý X U Â N N G Ọ C
• L Ê T H Ị T H U H Ư Ơ N G
• V Õ T Ư Ờ N G B Ả O L O N G
• V Ũ T R Ọ N G Â N
 E C O N O M I C M O AT S

I. intangible asset
brand . patents . License

II. efficient scale

niche market . enclosed market

III.switching cost

IV.cost advantage

V. network effect
I . I N TA N G I B L E A S S E T
B R A N D . PAT E N T S . L I C E N S E

• Fanatically loyal customers. Profit margins or cash returns on invested capital that

consistently exceed the industry average or those of their competitors.

• Successful companies with high priced, quality products or services for decades,

supported by their brand strength.

• Have the exclusive right or advantage to operate in a competitive environment.

BRAND PAT E N T LICENSE

II. EFFICIENT SCALE
NICHE MARKET . ENCLOSED MARKET

Monopolies that exist for the purpose of

Efficiency, consistent positive free cash flow and dividend payouts

NICHE MARKET ENCLOSED MARKET

General market Niche market
III. SWITCHING COST Products and services that are
not easily abandoned for a
• Switching costs are the costs that a consumer or firms
substitute or for a competitor’s
incurs as a result of changing brands, suppliers or
product
products.
• Although most prevalent switching costs are monetary in
nature, there are also psychological, effort- and time- “The computer says i need to upgrade my brain to
be compatible with its new software”
based switching costs.
• A switching cost can manifest itself in the form of
significant time and effort necessary to change suppliers,
the risk of disrupting normal operations of a business
during a transition period, high cancellation fees, and a
failure to obtain similar replacement of products or
services.
 Linux
Window

Cost:
• Time
• Money
• Unnecessary
risks
IV. COST ADVANTAGE
• Having a cost advantage is when a firm that can
produce a particular product or service at a
lower cost than the competitors. Cost is a result Meaningful economies of
of factors such as technology, automation, scale and over a decade of
processes, productivity and resource costs.
healthy operating and
profitability ratios
• In a commodity industry, a cost advantage can
be a significant competitive advantage that
allows a firm to dominate a market.
• Firms with a significant cost disadvantage are
more vulnerable to price declines due to factors
such as supply and demand issues.
 Firm Competitors

Revenue 100$ 100$

Cost 50$ 70$

Profit 50$ 30$

20$
Margin
IV. NETWORK EFFECT

What is the Network Effect

NETWORK EFFECT
• The network effect is a Value Cost

phenomenon wherein increased

numbers of people or

participants improve the value

of a good or service.
Users
• Networks that become more

useful as more people join .

 E C O N O M I C M O AT S

I. intangible asset
brand . patents . License

II. efficient scale

niche market . enclosed market

III.switching cost

IV.cost advantage

V. network effect
 Small game
Prize: Each correct question = One ballpoint pen
1.How many economic moats?
A.4
B.5
C.3
D.6
2. Can a firm have multiple economic moats?

A. Yes
B. No
C. Depend on the competitors
D. Yes but not in government company
3. Can a company lose their economic moat(s)?

A. Yes
B. No
C. Depend on the competitors
D. Yes but not in government company
4. In intangible asset economic moats, what
is the three subset?

A. Patent . Exclusive . License

B. Patent . Reputations . Brand
C. Brand . Exclusive . Reputations
D. Brand . Patent . License
*x2 the prize*
5. Vinamilk (VNM)’s economic moat(s) is/are? *x2 the prize*

A. Intangible asset
B. Efficient scale
C. Switching cost
D. Cost advantage
E. Network effect
 THE END
• H Ứ A L Ê Q U A N G
• H U Ỳ N H L Ý X U Â N N G Ọ C
• L Ê T H Ị T H U H Ư Ơ N G
• V Õ T Ư Ờ N G B Ả O L O N G
• V Ũ T R Ọ N G Â N