I want to reduce the size of the internal hard drive of the emulator.

No — you can’t reduce the internal /data storage size of Genymotion Desktop, and the external storage feature is not available there. That feature is only described for cloud instances, where an attached external disk can be used as internal storage instead of the primary disk: External Storage.

What you can do instead is create a new virtual device with a smaller storage configuration if your goal is to use less space on your host machine.