Reference no: EM133092351

Case Study: Global Value Chain Management and Shipping

Aquaculture Opportunity

Kalastaa Inc. has been in the local Finnish aquaculture industry for nearly fourteen years. It raises salmon and trout for local markets, and has recently negotiated a deal with a small fish processing plant that distributes under a major product label in Finland. Although it runs a rather small operation, employing 16 people year-round, Kalastaa believes it could export some surplus and perhaps broker further deals with fish processing plants around the European Union. It does want to maintain ties with the local fresh fish markets, but sales have been steadily decreasing since the sudden market influx of cheaper Scottish salmon. It knows its stock is of higher quality and could be exported abroad quite profitably. Kalastaa has contacted the government and enrolled in small business export initiatives. This has enabled the company to attend aquaculture conferences abroad and offered the opportunity to network, ultimately leading to contact with DanskFisk, a Danish importer.

Certification Troubles:

DanskFisk was eager to negotiate a contract for two tonnes of Finnish salmon to distribute to clientele throughout the country. Payment of credit was arranged by a Danish bank. The documents required were a commercial invoice, the insurance policy, a marine bill of lading and a certificate of quality. Kalastaa has arranged to have its fish inspected by a nationally accredited standards organization. Both parties agree in their contract that Kalastaa will pay freight to Copenhagen and will also insure the shipment. Once the salmon has been delivered, DanskFisk will assume all responsibility.

The Finnish Food Safety Authority reports to Kalastaa that the fish to be exported is of superior quality, with a fat content of 11 percent. The certificate of quality includes a code for superior quality and states a color code that is standard to the DSM SalmoFan. Colour coding is a common practice in the fish industry and provides a method of standardization for something as subjective as color. Both in production and sales, colour is the most important quality parameter for salmon. Salmon buyers can request information on the colour of a delivered lot in the form of a number corresponding to a colour number on the SalmoFan. Kalastaa's bank, acting as its export advisor, contacts the company to tell it that the letter of credit has fallen though because the certificate of quality is vague and it cannot ascertain whether the shipment has passed its quality certification.

Quality Questions:

The documents were delivered directly to the buyer for payment. DanskFisk insists on inspecting the shipment upon arrival. DanskFisk is not an experienced salmon importer, and usually deals with Spanish bluefish and Irish Arctic char. The importer is not in disagreement that the salmon shipment has passed quality inspection. Upon DanskFisk's inspection, it claims that the fat content of the stock is much higher than claimed in the quality inspection. It rejects the sale and will accept substitute goods, but is claiming damages for loss of profit. Kalastaa management wonders if it needs to rethink its exporting strategy.

Questions:

1. Would Kalastaa have benefited from employing a freight forwarder? Explain

2. Which shipping vessels would be most appropriate for Kalastaa to ship their product to Rotterdam? Explain your choice.