I mean, isn't the creation of subdomains to rank higher in other countries a way to manipulate search engine results?
Isn't that the same thing you'd be doing by moving them to their own directories too?
That's part of what I'm saying with 'if it's unique it's unique'. If it's unique enough to warrant the need for it's own directory, outside of search engine rankings, then IMO it's unique enough to be on it's own sub-domain. If it's not unique enough for it's own sub-domain, then IMO it's not unique enough for it's own directory either, because as far as search engines go sub-domains are treated very much like directories.
IOW This:
contry.example.com
Is not much different than:
example.com/country
To Search Engines as far as I know they're treated about the same.
"it's either unique or it's not.." easy to say ... but what about partially unique?
If the pages present different content for visitors to the extent the majority of the content is unique for visitors from each country, then personally I would separate the content. (Either using a sub-domain or directory is recommended.) If the content is 'essentially the same' then I would think about combining the pages and showing the information to everyone.
As for the duplicate content issue, I should have mentioned earlier that all the countries I targeted had either French or English as their first language (usa, uk, australia, canada, france, belgium, swiss, quebec ). As you can see, the UK site and the US site where bound to be very similar (except some variations like targeted currencies and cities listings).
I would definitely split the languages up, but might show the language specific pages to visitors from each country speaking those languages... So, in your case, where you are worried about duplicate content, I might do this:
en.example.com -> usa, uk, australia, canada
fr.example.com -> france, quebec, belgium, swiss
From there, I
might, depending on the uniqueness of the content, separate the countries into their own directories:
ADDED: I just looked closer at your post, and the following is probably what I would do, because IMO if you're displaying different cities based on country those would definitely make a page unique, and would IMO cause the need for each having it's own page or directory. It really depends on the situation, but it seems really silly to display cities in Australia to visitors from the UK if their looking for information about the area they're in, but without seeing and understanding the site it's really tough to say absolutely for sure. en.example.com/usa
en.example.com/uk
en.example.com/australia
en.example.com/canada
fr.example.com/france
fr.example.com/quebec
fr.example.com/belgium
fr.example.com/swiss
Just to make sure you see the difference in what I'm saying the first example would only be one directory:
en.example.com/usa-uk-australia-canada/
fr.example.com/france-quebec-belgium-swiss/
That's probably not what I would call the directories, but it is how I would structure the sub-domains. One sub-domain with one directory containing all the English content, and one sub-domain with one directory containing all the French content. I would then probably combine the four separate countries pages on a single page using the above structure. So there would not be a separate page or directory for usa, uk, canada or austraila... They would all visit the same page of en.example.com to find the information they are looking for.