Pure Play
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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 suppl ...
. 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 E-commerce (electronic commerce) is the activity of electronically buying or selling of products on online services or over the Internet. E-commerce draws on technologies such as mobile commerce, electronic funds transfer, supply chain manageme ...
companies are often referred to as pure play retailers, as they sell only through the Internet.


Pure play method

In
finance Finance is the study and discipline of money, currency and capital assets. It is related to, but not synonymous with economics, the study of production, distribution, and consumption of money, assets, goods and services (the discipline of fina ...
, 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 In finance, equity is ownership of assets that may have debts or other liabilities attached to them. Equity is measured for accounting purposes by subtracting liabilities from the value of the assets. For example, if someone owns a car worth $ ...
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 In corporate finance, Hamada’s equation is an equation used as a way to separate the financial risk of a levered firm from its business risk. The equation combines the Modigliani–Miller theorem with the capital asset pricing model. It is used t ...
. 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 In finance, a stock index, or stock market index, is an index that measures a stock market, or a subset of the stock market, that helps investors compare current stock price levels with past prices to calculate market performance. Two of the pr ...
. The following calculation is then applied to return the beta coefficient of company A. : Unlevered Beta of B = Equity Beta of B / (1 + DEB × (1 − Tax RateB)) :Equity Beta A = Unlevered Beta of B × (1 + DEA × (1 − Tax RateA)) ::where ''DEA'' and ''DEB'' are the
debt to equity ratio The debt-to-equity ratio (D/E) is a financial ratio indicating the relative proportion of shareholders' equity and debt used to finance a company's assets. Closely related to leveraging, the ratio is also known as risk, gearing or leverage. The tw ...
s 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 GlobalFoundries Inc. (GF or GloFo) is a multinational semiconductor contract manufacturing and design company incorporated in the Cayman Islands and headquartered in Malta, New York. Created by the divestiture of the manufacturing arm of AMD, ...
, have no in-house design capabilities, and fabricate
integrated circuits An integrated circuit or monolithic integrated circuit (also referred to as an IC, a chip, or a microchip) is a set of electronic circuits on one small flat piece (or "chip") of semiconductor material, usually silicon. Large numbers of tiny ...
(ICs) for
fabless semiconductor companies Fabless manufacturing is the design and sale of hardware devices and semiconductor chips while outsourcing their fabrication (or ''fab'') to a specialized manufacturer called a semiconductor foundry. These foundries are typically, but not exclu ...
, such as
Qualcomm Qualcomm () is an American multinational corporation headquartered in San Diego, California, and incorporated in Delaware. It creates semiconductors, software, and services related to wireless technology. It owns patents critical to the 5G, 4 ...
,
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 Xilinx, Inc. ( ) was an American technology and semiconductor company that primarily supplied programmable logic devices. The company was known for inventing the first commercially viable field-programmable gate array (FPGA) and creating the ...
,
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 An integrated device manufacturer (IDM) is a semiconductor company which designs, manufactures, and sells integrated circuit (IC) products. IDM is often used to refer to a company which handles semiconductor manufacturing in-house, compared to a ...
(IDM) foundries, such as Intel, IBM,
NEC is a Japanese multinational information technology and electronics corporation, headquartered in Minato, Tokyo. The company was known as the Nippon Electric Company, Limited, before rebranding in 1983 as NEC. It provides IT and network soluti ...
,
Texas Instruments Texas Instruments Incorporated (TI) is an American technology company headquartered in Dallas, Texas, that designs and manufactures semiconductors and various integrated circuits, which it sells to electronics designers and manufacturers globall ...
and
Samsung The Samsung Group (or simply Samsung) ( ko, 삼성 ) is a South Korean multinational manufacturing conglomerate headquartered in Samsung Town, Seoul, South Korea. It comprises numerous affiliated businesses, most of them united under the ...
, 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 money ...
campus in
Indiana Indiana () is a U.S. state in the Midwestern United States. It is the 38th-largest by area and the 17th-most populous of the 50 States. Its capital and largest city is Indianapolis. Indiana was admitted to the United States as the 19th s ...
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 Simply Market is a brand of French supermarkets formed ...
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 (businessman), Federico Marchetti ...
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 retail Retail is the sale of goods and services to consumers, in contrast to wholesaling, which is sale to business or institutional customers. A retailer purchases goods in large quantities from man ...
, 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

* * * * *


References

{{corporate finance and investment banking Types of business entity