First, to clairify, you're in Nieblehiem (sp?), not Kalm.

That boss is very difficult to defeat when you first go through Nieblehiem. Unless you feel like powering up your materia to better levels and earning levels on your charaters it's better to just pass on through town and come back and get it later. If you need in-depth strategies, check out www.gamefaqs.com.