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Stocks 206: What's behind Economic Moats and Competitive Positioning

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1.
When customers are fragmented and don't have much influence on a product, that is an example of weak _______.
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Buyer power. For the companies producing the products, that is a positive thing, as it strengthens their competitive positioning.
2.
If a company is involved in doing a lot of different things very well, that is a sign that it has a deep economic moat.
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True. In this case, they are really good at more than one competitive advantage.
3.
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 _______.
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Narrow moat. It would have a narrow moat of the eroding variety.
4.
Which of the five forces is most associated with the network effect?
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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.
5.
Why is it a good idea to avoid investing in companies that lack economic moats?
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They have few competitive advantages to keep rivals away. The definition of a moat is that of a competitive advantage over other companies.