Great product, huge market, keen buyers...

Imagine this: you are an MBA student sitting your final exam on business strategy and the question on your exam paper is: You have developed a new product, emotec, which gives customers sensations of pleasure, confidence and calm when they use it. For cost reasons you want to develop it in Indonesia. What is your strategy for setting up the company and making it a business success?

Answers to this question could help devise a new and more effective strategy for combating illegal drugs. At present, as the FT pointed out last week, efforts to control the trade are an expensive failure. Occasional successes pale into insignificance compared with the scale and growth of the illegal trade.

Surprisingly, the drugs trade is rarely viewed and described as an industry. But that's what it is - one run by clever and talented entrepreneurs who produce a product, transport it to market and sell it to enthusiastic customers who are not very concerned about price.

The aim of most governments, Britain's included, is to suppress the industry or its influence - but this approach focuses solely on the market: identifying customers, their needs and, most importantly, the means of persuading them to stop consuming. If persuasion doesn't work, the policy is then to get heavy: threatening users with stiff penalties, including imprisonment.

The reason for the concentration on the market and its mostly young consumers is that drugs are defined as a social problem, along with their undesirable side effects of addiction, violence and burglary. The unfortunate result is that only the output end of a complex system is paid proper attention. Public debate would be better informed by discussion of the whole chain of the production process - and its weak links.

So, back to the MBA exam paper. In his, or her, answer, the student may suggest the following five-step analysis for the launch of the new product. Studying its strengths and weaknesses could show us how to destroy, or at least slow the growth of, the drugs trade.

The first step is to understand the big picture. What are the technical, economic, organisational and social processes involved in getting the product from source to market? Who and what will this involve? How much will it cost and who are the best potential customers?

Second: what are the weak links in the management process? There are potential problems at every stage of the drug production chain. Crops have to be treated to make them usable, transport has to be obtained, customs bypassed, and local staff organised to handle payment and distribution. All of these activities are risky and difficult - and these weaknesses are potential strengths for the anti-drugs strategist.

Third, what systems of accountability, reward and punishment can be used to coordinate this complex set of management activities? While the orthodox industrialist uses payment, promotion and dismissal, the drug baron has recourse to more extreme incentives and disincentives, ranging from huge bribes for 'good' performance, to death as the consequence for failure. An anti-drug strategy needs to take account of all of these.

Fourth, what kind of information is required at each stage of the journey from supply to market? Finding the answer may suggest ways of penetrating the drug barons' communications networks or disrupting their supply chains from outside.

Fifth and last, the major responsibility of the new company's managing director is to ensure that all of these complex activities are integrated, monitored and controlled so that the product arrives successfully at its market destination.

Usefully applying this set of analytical management tools to understand an industry's power is nothing new - the 'big picture' approach is favoured by most management teachers.

A business approach suggests further possibilities for action. For example, both the legitimate manager and the drug entrepreneur have the task of managing the profits. This is much more difficult for the drug baron who, unlike his counterpart, needs to turn 'dirty' money into 'clean' before it can be spent, a process that demands amenable and influential partners. It is here that the fastest progress in reducing the power of the drug industry could probably be made.

At present, $200 billion is laundered globally every year. Tightening financial controls to make money laundering harder would, at a stroke, make the drugs trade much less attractive.

It is also important to note, that, as with any other product, the demand for drugs alters over time as a result of fashion, product development and changing prices.

Technology also plays a part. Chemical-based drugs such as ecstasy can now be manufactured locally from recipes downloaded from the Internet. Cannabis can also be bought online - an innovation that could have impact spreading beyond users. As the net becomes a major selling agent, users who once funded their habit through small-time drug dealing may find this opportunity no longer exists, and crime such as theft may actually increase.

The most interesting question forced to the surface by a management strategy approach is, of course, the most basic: should drugs be turned into a legitimate business?

Legalisation would make price and quality subject to regulation, as in other businesses such as alcohol and tobacco. Decriminalisation, on the other hand, although removing punishment for personal use, would leave the business in the hands of criminals, with all the associated uncertainty and dangers.

Leaving things as they are while discussion focuses more on customers than on producers seems the least desirable option. If we are sticking with this strategy, the debate and action should at least be extended from the drug users to the total drug management system.

• Enid Mumford, Emeritus Professor at Manchester University, is author of 'Dangerous Decisions: Problem Solving in Tomorrow's World' (Kluwer Academic/Plenum 1999)