Hierarchical taxonomy structures
You can construct your hierarchy using the core module taxonomy.  Go to admin/structure/taxonomy, create your vocabulary and add your terms. The form that lists your terms precedes the name with a graphic arrow widget (points in four directions.  Selecting that widget and dragging can reposition the terms in parent child relationships, and your done!  The Taxonomy Manager module can help you add large quantities of terms to a vocabulary very quickly as well.