Cadbury: It's Crunchie Time.

The week ahead is likely to be critical for Cadbury. As well as launching its defence tomorrow, the union Unite will kick off the campaign by Cadbury workers to keep the firm independent, and local MPs will press the government to back the firm.

And Kraft may still face competition in bidding for Cadbury. Most analysts expect rival chocolate giants such as Hershey, Nestle and Ferrero to wait until Cadbury unveils its defence document tomorrow before making a final call on whether to bid for the firm.

Hershey in talks with Cadbury on White Knight Bid?

Speculation on Hershey in particular has soared on news that it has been in talks with Cadbury on a possible 'white knight bid'. Hershey already produces some Cadbury products under licence in the US market, and may be willing to offer more cash than Kraft.

Yet it has also been reported that a rift has opened up between Hershey's management team and the firm's controlling philanthropic body, the Hershey Trust.

The trust owns around a third of Hershey's stares but has 80% of its voting rights, and is thought to be pressing management to make an offer for Cadbury. The trust sees a consolidating chocolate industry and is concerned that a Kraft-Cadbury combo would be a powerhouse which would scupper Hershey hopes of expanding in emerging international markets.

The firm has struggled in overseas markets, with just 10% of its sales coming outside of the US. In recent years its sales have stagnated and its share price has declined.

But Hershey's board is concerned that borrowing to finance a takeover could devalue the firm's credit rating which is currently investment grade, and thereby push up its cost of borrowing.

A Hirshey bid would certainly make more strategic sense than the Kraft bid for Cadbury. The latter is all about Kraft trying to buy growth after lacklustre performance, and in so doing potentially over reaching itself both financially and strategically given its huge portfolio of activities.

So a Hershey takeover would probably mean less risk for British and Irish workers, especially given a better geographical 'fit' to their sales. Hershey and Cadbury do have things in common - in terms of a focus on chocolate, market exposure and more similar cultural styles of management. So it is understandable that Todd Stitzer, the CEO of Cadbury, has hinted that he considers Hershey a better cultural fit than Kraft.

But remaining independent must still be the first best option here for Cadbury - afterall most takeovers fail and Cadbury has outperformed Hershey in recent years - why therefore allow the takeover of a large successful firm (Cadbury) by a smaller and less dynamic foreign firm which will have to borrow heavily to finance the deal?

Unite the union has rightly said that if Hershey was about to make a bid, they would be asking the some tough questions that they have asked Kraft, over plans for operations in the UK and Ireland and implications for jobs, investment, pensions and pay.

We need to look again at takeovers

The union has a good point. Given the lack of any meaningful industrial policy in the UK, combined with its openness to foreign takeovers, there is little left of UK manufacturing which is not foreign owned. Rolls-Royce is one obvious exception. Cadbury is another.

Of course many foreign investors bring long-term commitment - witness Tata with Jaguar Land Rover. But that is by no means guaranteed and we need to look at takeovers especially on a case-by-case basis.

The result of the 'open door' approach to foreign takeovers of UK firms - combined with the lack of a supportive policy environment - has been a more rapid hollowing out of the UK's manufacturing base than in other 'advanced' economies. Strategic decisions have been made back at the home (overseas) headquarters, with the UK treated by foreign multinationals as a branch plant economy.

This has to change. Growth when it does come is likely to be stimulated by exports given the depreciation of sterling. That means having a strong domestic manufacturing base, protected from hostile takeovers if need be. A balance of foreign and doemstically owned firms really does make sense for the UK economy.

Given that most takeovers actually fail to deliver, keeping Cadbury independent would be best for both shareholders and workers. Meanwhile, we can all support the firm by putting Cadbury chocolates in our Xmas stockings.

Professor David Bailey works at Coventry University Business School.