# Pure play

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{{Short description|Type of company}}
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.<ref>{{Cite book|title = Dictionary of Finance and Banking|last = Law|first = Jonathan|publisher = Oxford University Press Print Publication|year = 2014|isbn = 9780199664931|location = Oxford}}</ref>

Pure play firms either specialize in a specific niche, or have little to no [vertical integration](/source/vertical_integration). 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.

Companies that transact exclusively via [e-commerce](/source/e-commerce) and have no [brick and mortar](/source/brick_and_mortar) retail spaces may be referred to as pure play online retailers.{{cn|date=July 2021}}

==Pure play method==
In [finance](/source/finance), the "pure play method" is an approach used to estimate the [cost](/source/cost_of_equity) of [equity capital](/source/equity_(finance))  of [private companies](/source/private_companies), which involves examining the [beta coefficient](/source/Beta_(finance)) of other public and single focused companies.<ref>{{Cite journal|jstor = 253253|title = The Pure-Play Cost of Equity for Insurance Divisions|last1 = Cox|first1 = Larry A.|date = 1988|journal = The Journal of Risk and Insurance|doi = 10.2307/253253|last2 = Griepentrog|first2 = Gary L.|issue = 3|pages = 442–452|volume = 55}}</ref> See also [Hamada's equation](/source/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](/source/linear_regression) the return on B's stock on the return on the relevant [stock index](/source/stock_index). The following calculation is then applied to return the beta coefficient of company A.

:[Unlevered](/source/leverage_(finance)) Beta of B = Equity Beta of B / (1 + DE<sub>B</sub> × (1 − Tax Rate<sub>B</sub>))

:Equity Beta A = Unlevered Beta of B × (1 + DE<sub>A</sub> × (1 − Tax Rate<sub>A</sub>))

::where ''DE<sub>A</sub>'' and ''DE<sub>B</sub>'' are the [debt to equity ratio](/source/debt_to_equity_ratio)s of company A and B respectively.<ref>{{Cite journal|title = Estimating the Divisional Cost of Capital: An Analysis of the Pure-Play Technique|last1 = R|first1 = Fuller|date = 1981|journal = Journal of Finance|volume = 36|issue = 5|doi = 10.1111/j.1540-6261.1981.tb01071.x |last2 = H|first2 = Kerr|pages = 997–1009}}</ref>

== Pure play foundries ==
Pure play foundries, such as [TSMC](/source/TSMC) and [GlobalFoundries](/source/GlobalFoundries), have no in-house design capabilities, and fabricate [integrated circuits](/source/integrated_circuits) (ICs) for [fabless semiconductor companies](/source/fabless_semiconductor_companies),<ref name=Brown>{{cite book|last1=Brown|first1=Clair|last2=Linden|first2=Greg|title=Chips and change : how crisis reshapes the semiconductor industry|date=2011|publisher=MIT Press|location=Cambridge, Mass.|isbn=9780262516822|edition=1st|url=https://books.google.com/books?id=9RnxtWd3ZEkC&pg=PA47}}</ref> such as [Qualcomm](/source/Qualcomm), [Broadcom](/source/Broadcom), [Xilinx](/source/Xilinx), [Nvidia](/source/Nvidia), among others. [Integrated device manufacturer](/source/Integrated_device_manufacturer) (IDM) foundries, such as [Intel](/source/Intel), [IBM](/source/IBM), [NEC](/source/NEC), [Texas Instruments](/source/Texas_Instruments) and [Samsung](/source/Samsung), provide both foundry design services and IC fabrication.<ref>{{Cite journal|title = Pure-play foundries comprise 84% of market, IC Insights says|last = Mutschler|first = Ann Steffora|journal = Electronics News|publisher = Reed Business Information Pty Ltd, a division of Reed Elsevier Inc.|year = 2008|location = Australia}}</ref>

== Pure play e-retailers ==
Compared to traditional [retail](/source/retail) stores, pure play [e-retail](/source/e-commerce)ers can serve a wider audience without physical boundaries and distance, and may target specific customer groups without the high cost of maintaining physical stores.<ref name=":0" />

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](/source/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.<ref name=":0">{{Cite journal|title = The Applicability of Porter's Generic Strategies in the Digital Age: Assumptions, Conjectures, and Suggestions|last1 = Kim|first1 = Eonsoo|date = 2004|journal = Journal of Management|doi = 10.1016/j.jm.2003.12.001 |last2 = Nam|first2 = Dae-il|first3 = J.L.|last3 = Stimpert|volume = 30|issue = 5|page = 580| s2cid=2925596 }}</ref>

==See also==
* [Diversification (strategy)](/source/Diversification_(strategy))

==Further reading==
* {{cite book | title=The Cost of Capital: Theory and Estimation | pages=221–224 | chapter=Estimating for non-traded assets | publisher=Quorum/Greenwood | author=Cleveland S. Patterson | isbn=978-0-89930-862-3 | year=1995 | oclc=31012404}}
* {{cite book | chapter=The Pure Play Method | title=Essentials of managerial finance | author1=John Frederick Weston | author2=Eugene F. Brigham | name-list-style=amp | year=1974 | publisher=Dryden Press | isbn=978-0-03-030733-1 | pages=[https://archive.org/details/essentialsofmana00west/page/623 623–624] | chapter-url-access=registration | chapter-url=https://archive.org/details/essentialsofmana00west | url=https://archive.org/details/essentialsofmana00west/page/623 }}
* {{cite journal | title=Ascertaining the divisional Beta for project evaluation — the Pure Play Method — a discussion|journal=The Chartered Accountant|volume=31|issue=5|date=November 2002|url=http://icai.org/icairoot/publications/complimentary/cajournal_nov02/p546-549.pdf|author=N.R. Parasuraman|pages=546&ndash;549}}
* {{cite journal|author1=Collier, HW |author2=Grai, T |author3=Haslitt, S |author4=McGowan, CB  |name-list-style=amp |title=Computing the divisional cost of capital using the pure play method|journal=Applied Financial Economics Journal|date=October 2006|publisher=Taylor and Francis|url=http://ro.uow.edu.au/cgi/viewcontent.cgi?article=1172&context=commpapers|format=PDF}}
* {{cite journal|title=The Pure-Play Cost of Equity for Insurance Divisions|author1=Larry A. Cox  |author2=Gary L. Griepentrog |name-list-style=amp |journal=The Journal of Risk and Insurance|volume=55|issue=3|date=September 1988|pages=442&ndash;452|doi=10.2307/253253|jstor=253253}}

==References==
<references />

{{corporate finance and investment banking}}

Category:Types of business entity

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Adapted from the Wikipedia article [Pure play](https://en.wikipedia.org/wiki/Pure_play) by Wikipedia contributors ([contributor history](https://en.wikipedia.org/wiki/Pure_play?action=history)). Available under [Creative Commons Attribution-ShareAlike 4.0 International](https://creativecommons.org/licenses/by-sa/4.0/). Changes may have been made.