Economic Moat: Overview, Importance, Example

What Is an Economic Moat?

By Keith Noonan – Updated Mar 18, 2025 at 3:04 PM

Key Points

Economic moats protect businesses by deterring industry rivals and maintaining market share.
Businesses gain moats from brand strength or operational efficiencies, prolonging competitive edges.
Larger businesses utilize economies of scale to enhance profitability and market positioning.

In olden times, moats were used to protect castles and other valuable strategic properties. These wide trenches would surround an important resource and were often filled with water to prevent attackers from being able to seize the target. While businesses today aren't actually building moats to protect their headquarters and factories, economic moats play a key role in protecting them against rivals.

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A castle with a moat. — Image source: Getty Images

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Academic views on economic moats

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About the Author

Keith Noonan is a contributing writer at The Motley Fool covering technology, consumer goods, and other sectors. He holds a bachelor’s degree in English from Boston College.

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John Mackey, former CEO of Whole Foods Market, an Amazon subsidiary, is a member of The Motley Fool’s board of directors. Keith Noonan has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Amazon and Shopify. The Motley Fool has a disclosure policy.