The Little book that builds wealth - Chapter1

I am currently reading a book called The little book that builds wealth by Pat Dorsey.  This is a very good book for those who are interested in understanding what are economic moats and how you can identify them.  He also provides ways to value them. I intend to provide a commentary on every chapter that I read and summarize some of my thoughts.

In Chapter1 he explains about what is an economic moat and why it makes sense to own businesses with economic moats.
Companies with economic moats will generate handsome profits for a very long time and that is what makes them valuable. Return on capital is the best way to judge if the company is profitable and shows how good the business is taking investment money and  earning returns on it. Economic moats protect the company from competition thereby enabling them to maintain their high profit levels and thereby increasing shareholder value.  Companies with competitive advantage have better margin of safety as they can afford to sometimes make mistakes but still be able to comeback to normal profitable levels because of structural advantages.

The chapter does not clearly explain what is an economic moat. It just gives some examples of how a Honda commands more price than Kia and also about how Coke or McDonald's could sometimes mess their  strategy but still comeback.  Some Indian examples I can straight away think off is how Titan can charge more price for their watches than other watches like say HMT or how a Ray Ban glass is more expensive than any other unknown branded glass.