Pure play is a business term used to indicate a company, business model or investment focused on a particular industry, product, service or line of distribution. For example, a software company that only makes one particular type of application, such as a content management system, is a pure play company. Similarly, a consumer products company that only sells one item line is another example of a pure play business. Maytag Corp. has been dubbed a pure play company, as it makes home and commercial appliances, while General Electric, in comparison, makes home and commercial appliances, but also has other product lines (i.e., engines) in other industry verticals (i.e., aviation).
Pure play retailers (e-tailers)
Pure play is also used to describe e-commerce businesses that only sell through the internet, and not through other channels. In its early days, Amazon was cited as an example of a pure play internet retailer, as it had no physical stores. Additionally, the term "pure play" has been used to describe companies that only operate over the internet. By this definition, some say Facebook is a pure play company.Content Continues Below
Pure play and stock trading
Pure play is also used in the stock trading and investment world, referring to companies that focus on and specialize in a particular product or service area while excluding other market opportunities. The "pure play method" is used to estimate a project's beta, or the risk and sensitivity of a project. For example, a pure play company might use the method to attempt to identify publically traded firms that are engaged in projects similar to the one they are targeting.
Pros and cons of pure play
There are pros and cons associated with being a pure play company. At a pure play business, company leaders can focus on the limited set of competencies that support their single product or service and restrict their investments to a core set of needs. This laser focus can lead to a competitive advantage, making the business a recognized expert or leader in that space. However, a pure play company is more sensitive to the economic and market forces that impact that space versus a diversified company. The company may benefit disproportionately when those forces favor growth, but that same company can suffer more significantly when facing negative market conditions.
Although "pure play" is accepted business parlance, there are some ambiguities and disagreements on how broadly or narrowly the term should be applied. For example, while some cite Amazon as a pure play internet retailer, others say that the term no longer applies, as the company now offers its distribution and technology platform to others -- making it more diversified than a pure play company.