A pure play company focuses solely on a particular product or activity. Investing in a pure play company can be considered as investing in a particular commodity or product of a company.
Pure play firms either specialize in a specific niche, or have little to no
vertical integration
In microeconomics, management and international political economy, vertical integration is a term that describes the arrangement in which the supply chain of a company is integrated and owned by that company. Usually each member of the supply ...
. For example, a coffee shop may call itself a "pure play" restaurant, and a factory that only produces goods (not designing or selling to consumers) may refer to itself as a pure play manufactory.
E-commerce companies are often referred to as pure play retailers, as they sell only through the Internet.
Pure play method
In
finance, the "pure play method" is an approach used to estimate the
cost
In production, research, retail, and accounting, a cost is the value of money that has been used up to produce something or deliver a service, and hence is not available for use anymore. In business, the cost may be one of acquisition, in which ...
of
equity capital of
private companies
A privately held company (or simply a private company) is a company whose shares and related rights or obligations are not offered for public subscription or publicly negotiated in the respective listed markets, but rather the company's stock is ...
, which involves examining the
beta coefficient of other public and single focused companies. See also
Hamada's equation.
Here, when estimating a private company A's equity beta coefficient, the equity beta coefficient of a public company B is needed; the latter can be calculated by
regressing the return on B's stock on the return on the relevant
stock index. The following calculation is then applied to return the beta coefficient of company A.
:
Unlevered Beta of B = Equity Beta of B / (1 + DE
B × (1 − Tax Rate
B))
:Equity Beta A = Unlevered Beta of B × (1 + DE
A × (1 − Tax Rate
A))
::where ''DE
A'' and ''DE
B'' are the
debt to equity ratios of company A and B respectively.
Pure play foundries
Pure play foundries, such as
TSMC
Taiwan Semiconductor Manufacturing Company Limited (TSMC; also called Taiwan Semiconductor) is a Taiwanese multinational semiconductor contract manufacturing and design company. It is the world's most valuable semiconductor company, the world' ...
and
GlobalFoundries, have no in-house design capabilities, and fabricate
integrated circuits (ICs) for
fabless semiconductor companies,
such as
Qualcomm,
Broadcom
Broadcom Inc. is an American designer, developer, manufacturer and global supplier of a wide range of semiconductor and infrastructure software products. Broadcom's product offerings serve the data center, networking, software, broadband, wirel ...
,
Xilinx,
Nvidia
Nvidia CorporationOfficially written as NVIDIA and stylized in its logo as VIDIA with the lowercase "n" the same height as the uppercase "VIDIA"; formerly stylized as VIDIA with a large italicized lowercase "n" on products from the mid 1990s to ...
, among others.
Integrated device manufacturer (IDM) foundries, such as
Intel, IBM,
NEC,
Texas Instruments and
Samsung, provide both foundry design services and IC fabrication.
Pure play E-retailers
Compared to traditional retail stores, pure play e-retailers can serve a wider audience without physical boundaries and distance, and may target specific customer groups without the high cost of obtaining information from these groups.
Compared to companies that integrate both offline and online, pure online internet retails do not have company brand recognition and reputation at the start-up stage, and customers are unable to touch, examine and test real products before buying them. The online shopping experience foregoes human contact with consumers.
Pure play gets physical
Beginning in 2015,
Amazon.com
Amazon.com, Inc. ( ) is an American multinational technology company focusing on e-commerce, cloud computing, online advertising, digital streaming, and artificial intelligence. It has been referred to as "one of the most influential economi ...
customers in mainland UK with pickup codes can get the order at collection lockers distributed in shopping centers and commercial blocks. Amazon also opened its first physical stores at
Purdue University
Purdue University is a public land-grant research university in West Lafayette, Indiana, and the flagship campus of the Purdue University system. The university was founded in 1869 after Lafayette businessman John Purdue donated land and mon ...
campus in
Indiana in 2015.
By 2015,
Simply Be
Simply may refer to:
* ''Simply'' (Blossom Dearie album), 1982
* ''Simply'' (K. T. Oslin album), 2015
* "Simply", a song by De La Soul from the 2001 album '' AOI: Bionix''
* Simply Market, a French supermarket chain
* Simply Beverages, an Amer ...
had sixteen physical stores.
Net-a-porter
YOOX Net-a-Porter Group S.p.A. is an Italian online fashion retailer created on 5 October 2015 after the merger between Yoox Group and Net-a-porter Group (NAP).
Yoox was originally founded by Federico Marchetti in Milan in 2000, and Net-a-Porte ...
Launched a pop up window shop and apply image recognition technology to enable customers to find video content of the clothes and the online shop.
In 2015,
Kiddicare
Kiddicare was a British multichannel retailer, selling nursery supplies and merchandise for children and young families. Founded and owned by Marilyn and Neville Wright, it was the largest privately owned online retailer of its kind, until its ...
, a childcare brand, announced plan to open 12 stores in the UK.
Ocado
Ocado Group is a British business based in Hatfield, England, which licenses grocery technology. It owns a 50% share of Ocado.com (the other 50% is owned by UK retailer Marks & Spencer) and licenses its grocery fulfilment technology to global ...
launched a virtual shopping wall at One New Change, Birmingham's Bullring shopping center and Bristol. Customers can shop by using Ocado's “on the go” app to scan product's barcode on the wall.
eBay
eBay Inc. ( ) is an American multinational e-commerce company based in San Jose, California, that facilitates consumer-to-consumer and business-to-consumer sales through its website. eBay was founded by Pierre Omidyar in 1995 and became a ...
opened an inspiration shop in New York in 2011.
See also
*
Diversification (strategy)
Further reading
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References
{{corporate finance and investment banking
Types of business entity