It is important to realize that human resource management practices are best thought of as tools that can be used to help support the mission, vision, and purpose of an organization. Thus, as specified in Figure 1, the first thing that business managers need to do is develop a clear plan for how their business is going to compete in the marketplace. This competitive strategy could be based on a low-cost model (where a business owner decides to try to build a customer base by offering a quality product/service for a lower price than competitors), on a differentiation strategy (where a business owner competes based on identifying how their product/service is more unique and useful), or on some form of hybrid strategy. It is important to note that the business strategy should be in line with the operating environment (i.e., the local marketplace). As noted by the bi-directional arrows in Figure 1, the human resource system (and the resulting knowledge, skills, and abilities of the workforce) should also impact the type of strategy that a business should pursue. For instance, without a skilled and knowledgeable workforce a business cannot effectively pursue a differentiation strategy.