A business moat is what protects a company from its competitors. Think of a medieval castle surrounded by water—that’s a moat. In business, the moat is something that makes the company hard to compete with, like a strong brand, loyal customers, or special technology.
For example, Coca-Cola has a moat because of its brand. People around the world recognize it and trust it. Amazon’s moat is its huge delivery network and customer service. These moats keep other companies from stealing their customers or copying their success too easily.
There are different kinds of moats. Some are based on cost, like Walmart being able to sell products for cheaper than others. Some are based on patents or licenses that keep others from copying their products. Others come from being the first and best in the market, like Google in search engines.
When a company has a strong moat, it usually has better profits and a more stable business. That’s why investors love to find companies with solid competitive advantages. A good moat means a company is built to survive—and thrive—even when the market gets tough.
