Artificial Intelligence (AI) stands out as a revolutionary force driving profound shifts in strategic decision-making processes. This paper embarks on a comprehensive exploration of the transformative role of AI in strategic management. Beginning with an analysis of AI’s evolution, we delve into its integration into business strategy formulation, juxtaposing traditional strategic paradigms with AI-infused approaches. A sector-specific investigation highlights industries significantly altered by AI, underscoring its pervasive influence across diverse sectors. We also explore real-world scenarios, recording AI-enhanced success stories and revealing the inherent challenges businesses face during AI’s integration. To effectively navigate this terrain, it’s crucial for businesses to ensure transparency and explainability in AI systems (Castelvecchi, 2016) [9], maintain rigorous audit trails (Brundage et al., 2018) [4], actively avoid biases (Buolamwini & Gebru, 2018) [7], and promote inclusive development (Knight, 2017) [18]; (O’Neil, 2017) [24]; (West, 2018) [23]; (Wirtz, Weyerer, & Geyer, 2019) [14]. Understanding AI’s limitations (Brynjolfsson & McAfee, 2014) [5], championing continuous learning (Davenport & Ronanki, 2018) [11], adopting a collaborative approach (Agrawal, Gans, & Goldfarb, 2022) [1], prioritizing security (Zhu & Liu, 2018) [12], and engaging stakeholders are key in AI-driven strategic formulation (Fountaine, McCarthy, & Saleh, 2019) [13]. Beyond its practical implications, AI’s strategic dominance raises complex ethical dilemmas. This research clarifies the multifaceted ethical challenges posed by AI-driven decision-making, with a focus on biases inherent to algorithmic predictions and regulatory challenges. By integrating AI’s evolutionary path, tangible business impacts, ethical considerations, and best practices, this paper offers an enlightening journey through the AI-augmented strategic landscapes of contemporary businesses.