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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.
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.
3.
Why is it a good idea to avoid investing in companies that lack economic moats?
They have few competitive advantages to keep rivals away. The definition of a moat is that of a competitive advantage over other companies.
4.
A company that was once a major player in its market but is now suffering the effects of increased buyer power and a flight to other, related products would have a _______.
Narrow moat. It would have a narrow moat of the eroding variety.
5.
Being unable to enter a market because it would cost a huge amount of money just to break into it is an example of _______.
Threat of new entrants. In this case, the threat is low.
