Economic moats
The strong based multinationals in our society thank their position because of their economic moats. Moats practically mean strong fundamentals that makes it hard for competitors to compete. Mircosoft for example. Within all schools in Europe children learn how to work with Word, Excel, Powerpoint, Access and Windows. During my bachelor in Finance, I have been though only 1 ERP system, which was Microsoft dynamics. It is not the most used system in Finance. If I had started a business directly after school, I would have probably chosen for the system which I already know.
Here I will explain you more about different moats.
Cost advantage
Cost advantage is when a company can buy in so big that they pay a very small price per unit. Examples are H&M, ZARA and Primark. Small shops and brand can hardly compete on prices, because they can´t have the same profit if they would use the same prices.
Size advantage
When a company is big enough, there is no treat for aggressive takeovers. The company is the head of the food chain. An example of this is Google. They take over other companies, but are so big that they won´t be eaten by any competitor.
Intangibles
This includes patents, brand recognition, government licenses and others. Apple and Samsung are continually fighting over patents, because they both want to be top of the market. Apple has a strong intangible asset which is IOS, instead of Android.
Soft Moats
This is exceptional management or a great team. Think about Warren Buffet for Berkshire Hathaway. Warren Buffet bought Berkshire Hathaway in 1962, but what if he decides to quit. What would this mean for Berkshire Hathaway. Is the base strong enough to keep growing?
Networking effect
The networking effect is that people that buy a product promote it. Think about Bitcoin. The buyers of Bitcoin, because they profit from a growing popularity. The same counts for Facebook, Instagram, Linkedin and Twitter. Everybody wanted more follower, but at the end you are only creating extra value for the company.
Do you think that Bitcoin has more moats then just the networking effect?