Permanent excise taxes inculcated the English to the practice of taxing all citizens; soon this matured into the conviction that all should contribute towards the support of the government. The poor ought to pay taxes to the best of their ability as part of their duty to society. John Locke, the political theorist intimately connected with the Glorious Revolution, whose writings served as the basis for the Declaration of Independence, strongly supported this idea. ‘Governments cannot be supported without great charge and it is fi t everyone who enjoys his share of protection should pay out of his estate his proportion for the maintenance of it’. Th e contract between government and its citizens, he believed, included an obligation on the part of each constituent for the maintenance of the state. Th is in turn meant that governments could ‘not [to] raise taxes on the property of the people without the consent of the people’. A century later Adam Smith would echo this sentiment; his first ‘maxim of taxation’ declared, ‘Th e subjects of every state ought to contribute towards the support of the government, as nearly as possible, in proportion to their respective abilities’

Exit barriers are also important as they vary widely across industries depending on the amount of sunk costs. These are costs a company will not recover when it exits a business.

Power of supplier: Integration potential Industry dynamics might be changed, for example, by vertical integration
of suppliers.

Threat by new competitors: High entry barriers can decrease the threat by new competitors. Entry barriers can result from:

• Economies of scale
• Product differentiation
• Cost advantages
• Capital needs
• Access to distribution channels
• Technology know-how
• Access to raw materials
• Location advantages
• Government subsidies
• Learning curve/product experience.

Threat by substitutes: The quality or price of substitutes poses a threat to an industry since those substitutes may induce a structural change of an industry.

Power of buyers: Price sensitivity and bargaining power of buyers have a great effect on the profitability of industries. The automobile industry is a good example at this point. The build-up of overcapacities created a buyers market.