Pure play

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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 and Netflix.com . There are also many smaller, niche oriented pure play mail order companies such as women's travel accessories company Christine Columbus and fashion jewelry merchant Jewels of Denial. 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 multi-channel marketing is a hot buzzword, there is still plenty of growth opportunity for pure play merchants.

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.^[1] 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.^{[citation needed]}

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.^[2]

References

1. ^ Robert A. McLean (2003). "Special Topics on Capital Budegeting". Financial Management in Health Care Organizations. Thomson Delmar Learning. p. 221. ISBN 0766835472. 
2. ^ Eugene Foster Brigham and Louis C. Gapenski (1985). Financial Management: Theory and Practice. Dryden Press. p. 486. ISBN 0030980666. 

Further reading

• Cleveland S. Patterson (1995). "Esitmating for non-traded assets". The Cost of Capital: Theory and Estimation. Quorum/Greenwood. pp. 221–224. ISBN 0899308627. OCLC 31012404. 
• John Frederick Weston and Eugene F. Brigham (1974). "The Pure Play Method". Essentials of managerial finance. Dryden Press. pp. 623–624. ISBN 0030307333. 
• N.R. Parasuraman (November 2002). "Ascertaining the divisional Beta for project evaluation — the Pure Play Method — a discussion" (PDF). The Chartered Accountant 31 (5): 546–549. http://icai.org/icairoot/publications/complimentary/cajournal_nov02/p546-549.pdf. 
• Collier, HW; Grai, T; Haslitt, S; and McGowan, CB (October 2006). "Computing the divisional cost of capital using the pure play method" (PDF). Applied Financial Economics Journal (Taylor and Francis). http://ro.uow.edu.au/cgi/viewcontent.cgi?article=1172&context=commpapers. 
• Larry A. Cox and Gary L. Griepentrog (September 1988). "The Pure-Play Cost of Equity for Insurance Divisions". The Journal of Risk and Insurance 55 (3): 442–452. doi:10.2307/253253. 

See also

• Diversification (strategy)

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