Advice for setting up Subdomains and Subdirectories

I am looking for advice on how to best set up my network domain structure.

I am using multi-site and subdomains. There will be sites based on geography such as,


How would I set this up? Would I create a subdomain for and then create sub directories for USA.mydomain.Chicago?

Or would I create subdomains such as

How could I create subdirectories when using the subdomain structure? Is that possible?