The Cream of Europe's Crop

The Old World's economy is in a mess. Yet many of its companies are thriving. As BusinessWeek's first annual ranking of Europe's 50 top-performing companies shows, there are plenty of well-managed corporations with the size, stamina, and savvy needed to prosper in turbulent times. The likes of British bank HBOS PLC (No. 1 on our list), Belgian utility Electrabel, and Swedish apparel retailer H&M Hennes & Mauritz have all made great strides over the past three years in increasing sales and profits.

Such dynamic, growth-oriented companies have a lot to teach their more sluggish compatriots. One lesson is to focus on core businesses and customer relationships as the most effective way of increasing revenues while widening margins. Companies that discover what their clients really want and respond with innovative products creatively sold can increase their share and earnings even when many consumers are drawing in their horns.

A case in point is Riunione Adriatica di Sicurità. The Italian insurer has snatched business from rivals in recent years by focusing on its core insurance and financial-services businesses, increasing the size and reach of its already powerful distribution network, and motivating staff to sell more products.

Another lesson from the top 50: The quality of management counts for much more today than it did in the go-go days of the late 1990s, when the economy was growing fast and the equity markets were surging. Companies in this inaugural ranking are run mainly by men and women who know not only how to cut costs but also how to outsmart rivals in an increasingly competitive marketplace. Take Franco-Spanish tobacco company Altadis. It has trimmed staff and expenses while driving deeper into new markets and outwitting competitors when it comes to making acquisitions and launching new brands.

Politicians as well as business folk can learn from the BW Europe 50. No fewer than 17 of the top 50 and 6 of the top 10 companies are British. By contrast, German companies account for just 4 of the top 50 and none of the top 20. Why? Largely because companies in Britain aren't burdened by restrictive labor laws, big social security contributions, or the other structural rigidities that hamper their counterparts in Germany.

If one thing is clear from the inaugural edition of the BW Europe 50, it's that Germany in particular and Continental Europe as a whole need far-reaching structural reforms in order to encourage enterprise and reward growth.

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