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Analyzing companies

Lesson 69 · Written for kid, teen, and little

What Makes a Business Hard to Copy

Some businesses are protected by things rivals can't quickly copy.

The idea

A moat is anything that makes a business hard for competitors to copy or replace. Common moats are a trusted brand, a network effect where the product gets better as more people use it, high switching costs that make leaving painful, and scale that lets a company operate cheaper than rivals. A business without a moat can be copied by anyone, so its advantage tends to fade. Moats can also erode over time, so spotting one is a question to keep asking, not a promise about the future. 🛡️

A

Words to know

5

moat

Something that protects a business from copycats and competitors. Like a game everyone already plays because all their friends are on it.

competitor

Another business trying to win the same customers you want. Two taco trucks parked on the same street are competitors.

network effect

When something gets more useful the more people use it, like a chat app.

switching cost

The time, money, or hassle it takes to move to a different company's product. Moving every photo and contact to a new phone is a switching cost.

brand

The name and reputation people recognize and trust when they buy something. It is why someone grabs the familiar box without reading it.

Try it — no accountSort into groups

A moat is anything that makes a business hard to replace. Some advantages last, and some can be copied by tomorrow.

Sort each advantage.

0 / 6 sorted

In the full lesson

  1. 1Sort into groups
  2. 2Work out the number
  3. 3Make the call

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