Abstract
Batu City, Indonesia, has the local product potentials of potato chips with a number of 30 Small Medium Enterprises (SMEs). In improving their competitiveness, SMEs still have problems in product standardization, such as low communication and coordination in production and marketing among SMEs, Government, and marketing agencies. The research aimed to cluster the potato chips SMEs in Batu City for the business development strategy. The study method was the integration of k-means clustering and Fuzzy Analytical Network Process with 9 SMEs as respondents, which met the criteria required. The variables used in clustering are production capacity, number of workers, average turnover, length of operation, and halal certification status. The results showed that the SMEs of potato chips were formed in 2 clusters where cluster 1 (4 SMEs) of a micro-scale and cluster 2 (5 SMEs) of small-scale businesses. Cluster 1 developed the strategy by increasing access to capital, while cluster 2 through marketing access. The success rate of determining the SMEs industrial cluster development strategy will depend directly on the cooperation between institutions include core industries, supporting industries, raw material suppliers, and other supporting institutions.
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