Morgan Stanley IM: Measuring the Moat – Assessing the Magnitude and Sustainability of Value Creation

• It is critical for investors to assess corporate strategy, which explains how a firm builds a moat around its business that can lead to sustainable value creation.
• We begin by showing why strategy matters and distinguishing between industry and company life cycles.
• We turn next to industry analysis to get the lay of the land. We then discuss industry structure, disruption, and vertical versus horizontal integration.
• We finish with firm analysis. We examine the sources of added value, review pricing decisions, consider the impact of regulation, and then discuss brand value. We include a checklist.

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