The environment where project emerges, grows and terminates is called project environment. The project environment is made up of internal and external factors that influence a project. Each project procures inputs from environment, processes them to convert into customized output and delivers again to the environment.

Project environment creates the situation of strength & weakness and opportunity & threats. The project manager must understand the project environment and proactively plan to manage the factors that might influence the project. It’s like managing risk in that way.

The project environment analysis is held at the beginning of the project. This method identifies the lobbies and integrates the projct stakeholders into project group. All impact factors are analyzed in this analysis: project risks and chances, stakeholders and their interests, measures for the control.

The project environment is of utmost importance. Hence first we need to understand some of the elements of project environment:

1) Physical Environment: Physical environment is one of the key factor in project environment. Physical environment mostly includes the local ecology to the physical geography—weather, site access constraints, utilities, local service availability and availability of human and material resources. Physical environment cam be mainly classified as external factors, as they are outside of the control of your organization.

2) Political Environment: Political Environment mainly focuses on how the project team interacts with stakeholders. There may be illegal activities such as corruption, differences in local and national policies, changes in political power or influence and more. There are also cultural and religious issues to be taken into consideration.

3) Organizational Structure and Organizational Culture: Organizational Structure focuses on managing the project. There are various systems that outline how processes are done to achieve the goals of the organization, and in turn, the workings of the project. The organizational culture shapes how you execute the project.

4) Other Internal Project Environment Factors: Other internal factors include the tools, skills and experience of the team. Other factors also include market conditions, which are always changing. Depending on the economic environment, the financer might not have the ability to finance the project. There could be a lack of human and material resources and many other factors.