The "reduction" refers to the shrinking in size of the pocket of territory occupied by the invested force, which would appear to be reduced as seen from a map.
It is generally preferred for an enemy to surrender, as it entails the least risk of casualties to the victorious party.
For example, British General Cameron Shute said during the Battle of the Somme: I'm going to tell you this much, you know what you have got to do, the more prisoners you take, the less food you'll get, because we have to feed them out of your rations!
[3]Nevertheless, the decision to reduce an encirclement may be made for a number of reasons:
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