Normal text Cambria 12 BIU A 8 1 2 3 2. TB12 Inc. has a dominant position in its market at the present time. The company generates $200 million in sales, with a net profit margin of 18%. TB12's CEO had a reputation as a ferocious competitor who hated to lose (and didn't lose very often). The firm's recent merger with Bundchen Corporation, the most profitable modeling agency in the world, provided it with enormous amounts of cash on its balance sheet. Andrew Luck is a young Stanford University entrepreneur considering entering this market. Luck has tried to project what might occur when he enters the industry. In one scenario, TB12 Inc. slashes prices, provides more merchandising support to its retail partners, and increases advertising expenditures dramatically. TB12's revenues will drop by only 2.5%, but net profit margin will shrink to 12% in that scenario. Meanwhile, Luck will find the going pretty rough due to TB12's aggressive counterattack. Luck projects revenues will only reach $12 million in the first year, gross margin will be 25%, and SG&A and other expenses will total $8.5 million. In a second possible scenario, TB12 Inc. will maintain prices and advertising spending at current levels. Andrew Luck will pick off a chunk of customers as a result, though not a majority. TB12's revenues will drop 40% in that scenario, but net profit margin will remain at 18%. Meanwhile, Luck will reach $80 million in revenue and attain a net profit margin of 15%. Should Luck enter this market to compete with TB12 Inc.? Why or why not? Should TB12 fight aggressively? Why or why not? 2 CM W N