Potato chips small and medium enterprises (SMEs) in Batu City were formed into 2 clusters (micro and small scale) based on production capacity, sales turnover, number of labor, and length of production operation. SMEs "Agronas Gizi Food" and "Gajah" are representatives from these clusters which have good performance. The level of competition for the potato chips SMEs is increasing, thus encouraging the owners to develop strategies for expanding the market. The problems faced by the potato chips SMEs include the unstable supply of raw materials and the inconsistent quality of potato chips. The purpose of this study was to analyze alternative business development strategies in the potato chips SMEs cluster based on supply chain institutions and product quality using the Fuzzy SWOT method. The variables were measured based on supply chain institutions (i.e. farmers to distributors) and the quality of the production (i.e. color, size, crispness, and consistency of shape) with two potato chips SMEs as respondents. The results showed that the alternative strategy for supply chain institutional development in the potato chips SMEs cluster, in particularly is increasing the cooperative model partnership in the supply of raw materials. The alternative strategy to improve product process quality is standardization in the production process and product quality based on SNI.