Narrow Moat

Narrow Moat refers to a Competitive Advantage that a company possesses, which is somewhat limited in its ability to protect the business from competitors. This means the company can maintain its market position, but the advantage is not as strong or sustainable as a “wide moat.”

Examples of companies with a narrow moat include:

• Fast-Food Chains: Brands like Wendy’s or Burger King have recognizable brands and customer loyalty, but face intense competition from numerous other fast-food outlets.
• Consumer Goods: Companies like Colgate-Palmolive benefit from brand recognition and consumer preference for their products, yet face strong competition from other brands in similar categories.

Cases illustrating narrow moats include:

• Netflix: Initially, Netflix had a narrow moat with its subscription model, but as competitors like Hulu and Amazon Prime entered the streaming market, its advantage has become less secure.
• Adobe: Adobe has strong brand loyalty for its creative software, but as alternatives like Canva and open-source software become more popular, its moat has narrowed.