Barriers to Entry

The obstacles that keep competitors out of a market. In Competition Demystified, Bruce Greenwald and Judd Kahn keep it as the one competitive force that matters, and argue that real barriers (customer captivity, proprietary technology, economies of scale relative to market share) tend to be local rather than global.

Saved posts on Moats approach it from several sides:

• Rick Zullo argues that “companies don’t build moats, they build capabilities that yield them”, and adapts Greenwald’s customer and resource captivity to digital businesses with network effects and organizational design.
• Tren Griffin notes that starting a business is cheaper than ever but creating a moat that lets it survive is harder, quoting Charlie Munger: “We buy barriers. Building them is tough.”
• A post from @buccocapital observes that “pick and shovel” tools that lower start-up cost also remove barriers to entry, raising competition and the capital needed to hold share (Capital Allocation).
• A summary of McKinsey’s ten sources of competitive advantage serves as a checklist.

Where this appears

• 1. “Moats” Are a Term… (tweet)
• It is Cheaper and Easier… (tweet)
• Competition Demystified
• Investors Love “pick and Shovel”… (tweet)
• I Summarized @McKinsey’s 10 Sources… (tweet)