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1.
Which of the five forces is most associated with the network effect?
Barriers to entry. The network effect, one of the main types of moats we have identified, is a strong barrier to entry. It also reduces the threat of substitutes and buyer power, since industries with companies experiencing the network effect will have few alternatives.
2.
A company that resides in an industry where wide moats are nearly impossible to create might still have a narrow moat. Such a moat would be of what variety?
Moat with structural challenges. Due to structural factors, becoming a wide moat is nearly impossible, but the company can still enjoy a narrow moat and still be in a dominant position.
3.
What does an economic moat provide to a company?
A competitive advantage. Though the others may be true for many (or should be), a moat is the competitive advantage that one company has over other companies in its industry. As such, it has a lot of power to do what it wants.
4.
To find out whether a company you are investing in has a deep economic moat, you should look at _______.
How powerful any one competitive advantage is. This is what depth is about.
5.
Private-label products are an example of _______.
Threat of substitutes. Private-label products are an example of the threat of substitutes. These products threaten the sales and margins of branded products, which are typically more expensive to produce.
