Best way to create hierarchies tables

Good morning all,
I wanted to discuss the best practices of creating hierarchies to be consumed by OBIEE. As far as I understand, OBIEE has been optimized to use flattened hierarchies, such as:
ROW_WID CITY COUNTRY
1 NEW YORK CITY USA
2 MOSCOW RUSSIA
3 KIEV UKRAINE
4 SYDNEY AUSTRALIA
5 ATLANTA USA
Let's call it option 1. The only problem with this is that it has a potential to grow very wide. Also, There's a chance for confusion when there're duplicate entries, such as "New York" (city) and "New York State". Also, it's not always possible to define hierarchical relationships between data in a flat table - so-called ragged hierarchies. I found two major way of dealing with those (stack and flattening them out). Are there any other ways to deal with those? Specifically, I'm interested in dealing with hierarchies that involve complex positioning (a person might be a manager vertically, but managed horizontally - or - a person can have 2 managers - on different levels).
Also, in the example above - can I create dimensional outriggers (assign surrogate keys instead of text values to the dim - such as having NEW YORK as 100, MOSCOW as 200)? Sort of snowflaking a dimension. I was asked to do a proof of concept for this - but haven't been successful so far. If yes, could you please provide a simple Dim Outrigger < Dim < Fact diagram.
Thank you

Thanks Peter - I've checked that document before (I believe it's based on Kurt Wolffe's document on Siebel Analytics which I checked as well).
This option is fine if you're not going to do frequent changes - but in my case - it'll be a hell to maintain. We're sort of trying to prototype best solution - and it seems as flattening hierarchies is the best option, of course, given its limitations.
Also, there's another option of taking a different path and splitting and then building separate hierarchies

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