In order tobetter understand the activity and strategy of Nestlé company, it is importantto analyze the firm’s operating and structure variables and their impact in itstransnationality degree. Previously,Chapter 2 presented Transnationality Index (TNI) as of the most popular indexesused for measuring the extent to which a firm’s activities are located abroad.However, the assessment of transnationality degree requires taking intoconsideration a wider range of perspectives, such as operations perspective,stakeholders’ perspective or the perspective of spatial management andorganization. It is hardly possible to capture a company using a singlesynthetic measure and we should use composite structural and performanceindicators. The “InternationalizationIndex (II)” is the ratio of the number of foreign to the total number ofaffiliates and it shows the intensity of foreign operations according to thenumber of foreign affiliates. On average, it indicates that over 65 percent ofthe branches of top 100 TNCs are located abroad. One moreaspect of transnationality is the geographic extensiveness or the degree towhich a company’s operations and interests are spread in several countries orconcentrated in a few.
The variables used for this perspective can be thenumber of foreign countries, where the company has its officesand the Network Spread Index (NSI) measured as the ratio of the number of hosteconomies over the number of all potential host economies (number of economieswhich were in receipt of inward FDI) . The NEC isthe inverse of the level of concentration of foreign affiliates in n countriesmeasured by theequivalent of the Herfindhal index H, (NEC = 1/H). H = SUM (qi)2, where qi is the number of foreignaffiliates in country i divided by the total number of foreign affiliates, i =1,n. It is the way to take into account the spread of the operations of acompany is to consider the number of affiliates in each country – ideally, itshould be the amount of sales by country – as an indicator of the activities ofa company in each host country. The resultof multidimensional assessment gives us a slightly different picture thanranking the companies solely by TNI index or by their foreign assets. Thisapproach determines the transnationality of company’s operations basednot only on the size of the company. Table 3.Nestlé’s four dimensions of transnationality in comparison with its marketcompetitors Nestlé Switzerland Food & Beverages 74.
1 54.1 94.0 23.8 UnileverUK/Netherlands Diversified 64.5 43.7 60.
5 9.3 Cadbury Schweppes United KingdomFood & Beverages 87.0 15.3 80.0 11.
3 Source: Own elaboration based on UNCTAD statistics For example,on the list of the most transnational TNC with four measures oftransnationality measured by UNCTAD, Nestlé takes first place, while it is the30th in rankingby foreign assets and its TNI is lower in comparison with one of its chosencompetitors Cadbury Schweppes. Amultidimensional graph below plots the TNI, the II, the NSI and the NECmeasures altogether. Average rate was calculated based on the samplemultidimensional criteria of the top 50 companies.
