When the Makkan unbelievers launched a series of attacks on Madinah, Prophet Muhammad Sallallahu Alayhi Wasallam was able to confront them, and when the Makkans were finally defeated in the battle of the Trenches (AI-Khandaq), he was able to make truce with them at Hudaybiyah for ten years. This treaty was a masterpiece of practical statesmanship on the part of Prophet Muhammad Sallallahu Alayhi Wasallam.
His diplomacy in sending and receiving envoys to and from the various chiefs of tribes and foreign rulers, his fairness in conducting judiciary, and his general pardon at the liberation of Makkah, was another proof of his lofty statesmanship.
The State he established in Madinah was not a matter of chance. It was the very nature of his mission that he would establish a state to enforce the way of Allah. People might accept a new faith but it would take time to change their habits, custom and way of life. And even if a small group of people succeeded in changing their way of life, there would be many others who would not let these people practice their belief and try to stop them by force. So the Islamic State became an urgent necessity to protect the Islamic way of life.
The State founded by Prophet Muhammad Sallallahu Alayhi Wasallam was invested with physical force, as every State must necessarily be, to fulfill its function of stopping aggression and oppression.
A democratic system in Islam is expressed through the term Shura (council). The Quran says: “And those who respond to their Lord and keep up prayer and their affairs (of government) is by council among themselves and who spend out of what We have given them."