Sunday, January 28, 2007


Economies of scale, Organic, specialty, niche, sustainable province

Sorry if this is all over the map but it just got to be to all encompassing with little or no reference to critic. For what it's worth her are my thoughts on economies of scale in NL.

Water Quality map PH levels

Wind Atlas
Small wind project estimator

NL geological map for all you rock hounds

More questions than answers here. In fact that is why I originally looked up economies of scale to see what the terminology actually stood for.

I must say it wasn't what I thought it was. Here are a few different definitions but all in all they all say the same thing.

Economies of scale characterizes a production process in which an increase in the number of units produced causes a decrease in the average cost of each unit.

For example, imagine a production line producing widgets whereby the machinery of production costs 100 currency units a week to run and the incremental cost of each widget is one currency unit. If the machine makes 50 widgets a week then the average fixed cost of each widget is (100+50)/50 = 3 currency units. However, if the machine can make 100 widgets a week then the average fixed cost of each widget is (100+100)/100 = 2 currency units. In this example, the more widgets that are produced per week, the cheaper they are to produce and hence the process exhibits economies of scale.

Reduction in cost per unit resulting from increased production, realized through operational efficiencies. Economies of scale can be accomplished because as production increases, the cost of producing each additional unit falls.

The decrease in unit cost of a product or service resulting from large-scale operations, as in mass production.

Economies of scale are most likely to be found in industries with large fixed costs in production. Fixed costs are those costs that must be incurred even if production were to drop to zero. For example fixed costs arise when large amounts of capital equipment must be put into place even if only one unit is to be produced and if the costs of this equipment must still be paid even with zero output. In this case the larger the output, the more the costs of this equipment can be spread out among more units of the good. Large fixed costs and hence economies of scale are prevalent in highly capital intensive industries such as chemicals, petroleum, steel, automobiles etc.

small local markets
Would need some sort of Co-op or marketing board to unite all of the few and far between rural enterprises to access provincial, national, or international markets.

Hub for rural areas in region. Collector to forward larger shipments to provincial transhipment area. Secondary processing and value added processing for rural products. IE Planer mill, kiln wood dryer. Marketing packaging centre.
Quality and control center as well as meeting and training centre. Cyber also a big component to make few and far between economies of scale work. Time is money so if time needs to be taken away from production to accomplish this it is doomed to failure.

Transhipment to national or international markets.

Marketing arm

Marketing arm

I actually thought that when someone mentioned economies of scale they meant creating or promoting businesses enterprises that were of a size scale in proportion to the area in which it was being promoted or set up. Boy was I wrong according to these definitions economy of scale refers to mainly manufacturing and industrial businesses of which we don't have much and our province isn't really conducive to developing any either. What with our small populations and abundance of rural communities spread over such a wide area.

All is not lost IMO. Even though we are far and wide the terminology of economies of scale could still apply in that we combine share partner plan our economies of scale from a marketing, promotion, harvesting, Processing, Packaging.

Some endeavours are better suited for an economy of scale, targeted centre of excellence than others.

Now ideally we would still be better of doing centralization and regionalization of those enterprises which can avail themselves to such targeted areas such as Berry farming, Aquaculture, so that all of the enterprises in a common area can benefit from becoming an economy of scale and having access to a common pool of resources.
Like what fast food joints do gravitate to one area to benefit from an economy of scale type of coagulation.

Now there are some endeavours which will never be able to comply to a normal definition of economy of scale but even these enterprises can benefit from certain parts of an economy of scale definition like Marketing.

A prime example of this would be creating a marketing board or Co-op for all of the small and medium sized saw mills in the province so as that their combined output could be used to access the larger more lucrative markets. Now these small saw mills might need to have a central higher processing area for planning and kiln drying their product to meet industrial standards. Standards also becomes an issue with such a diverse economy of scale but education and monitoring should suffice to correct any deficiencies in this department. If not market forces will eventually rule and poor quality will result in poor returns.

So how do we in rural NL develop economies of scale?

There is the targeted market development approach. Encourage and develop all of the Mussel farm aquaculture along the north east coast of the island sort of kinda deal. So that all of the different mussel farming enterporises in the one area can benefit from combined expertise, harvesting tools and marketing. Or Salmon Aquaculture along the South coast.

What might be some more targeted economies of scale wild or cultivated Berry farming,

Centres of excellence
combined efforts, Knowledge sharing, marketing, Secondary processing value added,

Cultivated organic berry farms
Wild berry production marketing board
Goat/Sheep farms (free range)
Mink,Fox, farms
Farmers markets local
Lumber marketing board
Arts and crafts
Mussel Aquaculture
Salmon Aquaculture
Wind Farms
Flea Market
Organized annual garage sales per town
Call Centres
Craft Market
Marketing boards
Oil and Gas
Fish wild farmed fresh salt
Sustainable non destructive inshore fishing practices

Benefits of economies of scale partnering, Sharing, eliminate duplication, Mechanization, R&D,

Race for the bottom price or race for the top price/quality your choice depending upon which sector you are talking about.

We are a small market and would be hard pressed to compete against the larger markets which is what economies of scale is all about according to the definitions.

Instead we should be utilizing our small product and production to target niche and specialty markets like. Eco friendly farming, High quality products, specialty products like what has been done in the apple industry.

Even this approach needs a certian amount of economies of scale applied to them to reap the maximum benefits and remain competitive. Promote apple growing with apples and aquaculture with aquaculture etc.

Some of the specialty and niche market I can see us targeting are.
target specific niche markets, such as health, gourmet and organic foods. ...

Fresh or live fish. Fish caught using sustainable and non destructive practices in the inshore utilizing the
as a vessel for marketing.

We are perfectly situated with our small and medium sized agriculture industry to target the organic food industry. That and our low pest levels makes it easier to accomplish organic production. Or utilization of all natural fertilizers from the land and sea.

Canadian Organic growers

There is a bit of a conundrum with pursuing this type of market with the recent raised awareness of transportation impacts on the enviroment in that our markets are mainly non local so emphasis needs to be put onto the sustainable or organic side of things. It isn't like Nebraska has a local fish economy.

Most of our business being situated on the island should make it much easier to get organic accreditation. Less chance of cross contamination as well as our far and wide dispersion will help in isolating organic farming from industrialized farming practices.

Genetically Modified Free zone Province.
Non industrialized food production.
Humane food production. No Fois Gras with this type of campaign. Would just serve to highlight the humaneness of the seal fishery.

Some links for your benefit on Organic economies of scale.!Open
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