Pure play
Encyclopedia
In financial management
, a pure play is a company whose shares are publicly traded and that either has, or is very close to having, a single business focus. Coca-Cola
is an example of a pure play in this context because it retails only beverages. On the other hand, PepsiCo
is not a pure play because it also owns the Frito-Lay
snack foods brand.
The pure play approach or pure play method is a method for estimating the cost of capital
for a proposed new project or product line. It involves examining other companies, which are pure plays in the proposed line of business and inferring a cost of capital based on their capital structures (eg Debt-to-Equity ratio
) and betas
.
In e-business terms, a pure play is an organization that originated and does business purely through the Internet; they have no physical store (brick and mortar) where customers can shop. Examples of large pure play companies include Amazon.com
(in its initial business when it was only involved in retail products) and Netflix.com (in content). With a much lower barrier to entry, the Internet affords smaller companies the ability to compete with much larger brands due to typically lower overhead and marketing costs. Though multichannel marketing
is a hot buzzword, there is still plenty of growth opportunity for pure play merchants.
Managerial finance
Managerial finance is the branch of finance that concerns itself with the managerial significance of finance techniques. It is focused on assessment rather than technique....
, a pure play is a company whose shares are publicly traded and that either has, or is very close to having, a single business focus. Coca-Cola
The Coca-Cola Company
The Coca-Cola Company is an American multinational beverage corporation and manufacturer, retailer and marketer of non-alcoholic beverage concentrates and syrups. The company is best known for its flagship product Coca-Cola, invented in 1886 by pharmacist John Stith Pemberton in Columbus, Georgia...
is an example of a pure play in this context because it retails only beverages. On the other hand, PepsiCo
PepsiCo
PepsiCo Inc. is an American multinational corporation headquartered in Purchase, New York, United States, with interests in the manufacturing, marketing and distribution of grain-based snack foods, beverages, and other products. PepsiCo was formed in 1965 with the merger of the Pepsi-Cola Company...
is not a pure play because it also owns the Frito-Lay
Frito-Lay
Frito-Lay North America is the division of PepsiCo that manufactures, markets and sells corn chips, potato chips and other snack foods. The primary snack food brands produced under the Frito-Lay name include Fritos corn chips, Cheetos cheese-flavored snacks, Doritos and Tostitos tortilla chips,...
snack foods brand.
The pure play approach or pure play method is a method for estimating the cost of capital
Cost of capital
The cost of capital is a term used in the field of financial investment to refer to the cost of a company's funds , or, from an investor's point of view "the shareholder's required return on a portfolio of all the company's existing securities"...
for a proposed new project or product line. It involves examining other companies, which are pure plays in the proposed line of business and inferring a cost of capital based on their capital structures (eg Debt-to-Equity ratio
Debt to equity ratio
The debt-to-equity ratio 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...
) and betas
Beta coefficient
In finance, the Beta of a stock or portfolio is a number describing the relation of its returns with those of the financial market as a whole.An asset has a Beta of zero if its returns change independently of changes in the market's returns...
.
In e-business terms, a pure play is an organization that originated and does business purely through the Internet; they have no physical store (brick and mortar) where customers can shop. Examples of large pure play companies include Amazon.com
Amazon.com
Amazon.com, Inc. is a multinational electronic commerce company headquartered in Seattle, Washington, United States. It is the world's largest online retailer. Amazon has separate websites for the following countries: United States, Canada, United Kingdom, Germany, France, Italy, Spain, Japan, and...
(in its initial business when it was only involved in retail products) and Netflix.com (in content). With a much lower barrier to entry, the Internet affords smaller companies the ability to compete with much larger brands due to typically lower overhead and marketing costs. Though multichannel marketing
Multichannel Marketing
Multichannel marketing is marketing using many different marketing channels to reach a customer. In this sense, a channel might be a retail store, a web site, a mail order catalogue, or direct personal communications by letter, email or text message. The objective of the companies doing the...
is a hot buzzword, there is still plenty of growth opportunity for pure play merchants.